Hogs
Price action: June lean hogs rose $1.20 to $99.50, nearer the daily high and scored a bullish “outside day” up on the daily bar chart.
Fundamental analysis: The lean hog futures bulls are once again proving resilient despite cash market fundamentals that have deteriorated just a bit recently. Record-high live cattle and feeder cattle futures prices are providing spillover buying support to the hog futures market.
The latest CME lean hog index is down 7 cents to $89.92 as of May 9, the third straight daily decline, but those losses total just 24 cents. Wednesday’s projected cash index price is up 39 cents to $90.31. The national direct five-day rolling average cash hog price quote today is $94.12. The noon report today showed pork cutout value up 71 cents to $97.22, led by gains in ribs and hams. Movement at midday was good at 177.91 loads.
Technical analysis: Lean hog futures bulls have the overall near-term technical advantage. A bull flag pattern is in place on the daily bar chart. The next upside price objective for the hog bulls is to close June prices above solid chart resistance at the April high of $101.975. The next downside price objective for bears is closing prices below solid technical support at $95.00. First resistance is seen at today’s high of $100.00 and then at $101.00. First support is seen at today’s low of $97.475 and then at $96.00.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market through June.
Cattle
Price action: June live cattle futures closed 50 cents lower at $216.325 while deferred contracts saw modest gains. August feeders slid 37.5 cents to $306.00.
Fundamental analysis: Live cattle futures traded on either side of unchanged today, mostly favoring the downside, stabilizing the market amid overbought conditions. June live cattle are overbought on the daily bar chart as prices continue to grind higher. The downside likely remains limited given steep discounts to the cash market, which puts traders in a bit of a precarious position. Bulls shook off reports that the Mexican government only anticipates the U.S./Mexico border being closed a couple of weeks as cases of new world screwworm have worked their way closer to the border. While not denying the claim, USDA anticipates that it will look at the case on a monthly basis. Given how border closures have gone in the past few months, it seems more likely at this juncture that the border will stay closed for longer, which price action seemed to reflect today. Early trade in the cash cattle market is a bit above last week’s cash average at $225.00. Feedlots will be hard pressed to take lower bids given the recent strength of the market and little obvious signs of a top. While wholesale beef continues to inch higher, it has done little to offset higher cattle costs, sinking packer margins deeper into the red. Choice cutout rose another $1.43 to $349.57 at midsession today, while Select slipped $1.35 to $333.88. A friendly stock market, which pushed to fresh highs on the year and are within shooting distance of all-time highs, has also been supportive for cattle futures, indicating a renewed sense of optimism in the marketplace.
Technical analysis: June live cattle futures consolidated near contract highs today as bulls continue to maintain full control of the technical advantage. Initial resistance comes in at $216.825 though bulls are ultimately looking to overcome the record high of $217.75 on continued strength. Bears are looking to close the gap, which would challenge support at $215.60, which is reinforced by support at the psychological $215.00 mark, while additional selling would target support at $213.30, the 10-day moving average.
August feeders consolidated near contract highs today as bulls retain full control of the technical advantage. Resistance stands at the contract high of $306.90, which is reinforced by resistance at $308.00 Bulls are seeking to hold support at yesterday’s low of $303.025, which is backed by the prior record high of $301.90, then $300.40, the 10-day moving average.
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: You should have all corn-for-feed and soymeal needs covered in the cash market through June.