Hogs
Advice: We advise livestock producers to extend corn-for-feed and soybean meal coverage another month in the cash market through July.
Price action: June lean hog futures closed 50 cents lower at $99.525 and nearer session lows.
Fundamental analysis: June hogs saw some strength on this morning’s open but struggled to build on bullish momentum as pessimism over the summer outlook keeps traders wary of building premiums to the lean hog index. The CME lean hog index continues to work higher but gains have left something to be desired as the index has grinded out small gains day after day. The index is up another 39 cents to $91.85 as of May 19 and the preliminary calculation puts the index up another 49 cents to $92.34 tomorrow. June futures finished the day just $7.185 above tomorrow’s estimated quote, indicating traders do not anticipate a return of robust strength in the cash market over the course of the next month. That pessimism is likely drawn from the wholesale pork market, which continues to see largely rangebound trade. While pork cutout did poke above $100.00 the past few days, it has struggled to build much above that mark and movement has slowed, indicating weak grocer demand at higher prices. Weaker grocer demand and anticipated weak export demand in the summer months continue to weigh on both sentiment and near-term prices. After slipping lower yesterday, the CME lean hog index rebounded 36 cents to $100.88, led by strength in bellies.
Technical analysis: June lean hog futures set back today and look to continue in sideways choppy trade. Bulls continue to hold a modest advantage, though it has waned in recent days. Support at the 10-day moving average limited the downside today at $99.30, which will remain initial support. Selling below that mark targets the 20-day moving average at $98.80, which is reinforced by support at $98.25. Resistance stands at the psychological $100.00 mark then last week’s for-the-move high close of $100.70.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: NEW ADVICE -- Extend corn-for-feed and soybean meal coverage another month in the cash market through July.
Cattle
Advice: We advise livestock producers to extend corn-for-feed and soybean meal coverage another month in the cash market through July.
Price action: June live cattle rose 97.5 cents to $214.15, near session highs.
Fundamental analysis: Nearby live cattle eventually made a run at the 10-day moving average after facing resistance at the level in the past four sessions. Recent price coiling indicates a more profound move is on the horizon, with bulls certainly holding the advantage in a run at last week’s all-time high as they firmly grasp the near-term technical advantage amid supply driven fundamentals. Friday’s Cattle on Feed Report will likely see that earnest cash trade is pushed late into the week, though a few cattle did change hands at $219.00 in Kansas, which was over $1.00 lower than last week’s average for the region.
While cash prices have rocketed higher, wholesale prices have failed to keep up, pushing packer margins severely in the red. In the noon report, Choice cutout did rise another 71 cents to $359.46, while Select surged $4.06 to $349.02, with movement totaling 67 loads.
Feeders were pressured by followthrough strength in the grain complex, with the feeder cattle index diving to a near three-week low.
Technical analysis: June live cattle were able to score a close back above the 10-day moving average, currently trading at $214.03, as bulls continue to show their dominance. However, last week’s high of $218.625 will continue to limit hefty buying interest, though solid support lies at the 20-day moving average of $212.75 and should continue to play in bulls’ favor.
What to do: Get current with feed coverage. Carry all production risk in the cash market for now.
Hedgers: Carry all production risk in the cash market for now.
Feed needs: NEW ADVICE -- Extend corn-for-feed and soybean meal coverage another month in the cash market through July.