Livestock Analysis | March 25, 2024
Price action: Despite signs of cash slippage, strong wholesale gains apparently powered hog futures gains. Nearby April futures rose 57.5 cents to $85.15, while most-active June surged $1.70 to $101.975.
Fundamental analysis: April lean hog futures posted modest gains despite greater strength seen in the deferred contracts. The CME lean hog index edged up a nickel to $83.59 today (as of Mar. 21), but the preliminary calculation puts the index down 11 cents to $83.48 tomorrow. That confirms traders’ belief that gains in the index would slow down prior to the April contract’s expiration, which were apparent by the weakening of the spread between April futures and the index over the past week. Volume in the negotiated market picked up in the last couple of days, indicating packers are taking advantage of weaker pork prices, a sign that demand is robust and could limit the downturn in cash prices. The impressive demand could be what encouraged traders to add premium back into the April contract today. That is, the future closed lower each day last week despite strength in the cash index. The index is finally projected to go lower and April futures posted their first daily gain in over a week. That seemingly bodes well for bulls, though price action in the cash market is likely to dictate much of the trade leading up to this week’s quarterly USDA Hogs & Pigs report on Thursday.
Wholesale pork spent most of last week under pressure. That changed Friday when a big rebound in ribs led cutout higher. Wholesale pork prices continued to rebound at midsession, with cutout up $2.27 to $95.65, led by strength in bellies. The midsession quote marked the highest figure for pork cutout since early last October. Movement improved as well, totaling 177.79 this morning.
Technical analysis: Bulls clearly hold the short-term technical advantage in June hog futures in the wake of today’s price action. The fact that bears couldn’t force a close below the contract’s 40-day moving average price near $99.06 amidst the recent dip strongly reinforced the bullish bias, especially after the contract blasted back above its 10- and 20-day moving averages near $101.35 and $101.14, respectively. Those represent initial and secondary support, along with added support at the psychological $100.00 level. Today’s high marked initial resistance at $101.85, but given the strong close, a followthrough to the upside seems likely. Look for resistance around the March 1 high of $102.225, at the March 19 high of $103.00, then at the previous day’s top at $103.475.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market another month through April.
Price action: June live cattle fell $1.30 to $181.60, nearer the session low and hit a three-week low. May feeder cattle fell $1.15 at $252.625, nearer the session low and hit a two-month low.
Fundamental analysis: The cattle futures markets were pressured today by a bearish monthly USDA Cattle-on-Feed Report out last Friday afternoon. The report showed the March 1 cattle feedlot inventory up 1.3% from one year ago. Placements rose 9.7% in February while marketings were up 3.4%. While the report was bearish versus trader expectations, the overall report was a bit friendly. Some chart-based selling from the speculators was also featured today, as the near-term technical postures for both live and feeder cattle futures markets have deteriorated lately.
Last week’s cash cattle trade averaged $189.56, which is an all-time high and up $2.09 from the week prior. We look for cash trade this week to be steady-lower. The noon report today showed wholesale beef cutout value up just a bit, with Choice gaining 29 cents to $311.01, while Select rose 57 cents to $302.04. Movement at midday was 56 loads. The Choice-Select spread is presently $8.97.
Cattle traders and producers are closely watching a major storm in the Plains. World Weather Inc. today said blizzard conditions will continue today from western Kansas and eastern Colorado northeast into central and some of western Nebraska with snow and strong winds. Some wind gusts early today will be as high as 48 to 55 mph. “More travel delays and livestock stress are expected as a result.” Conditions will then be drier biased through Saturday with a warming trend before the next storm system begins to arrive, said the forecaster.
Technical analysis: The live and feeder cattle bulls still have the overall near-term technical advantage but have faded recently. June live cattle saw a 3.5-month-old price uptrend on the daily bar chart negated. The next upside price objective for the bulls is to close June futures above solid resistance at the March high of $186.625. The next downside technical objective for the bears is closing prices below solid technical support at $178.00. First resistance is seen at today’s high of $183.35 and then at Friday’s high of $184.65. First support is seen at today’s low of $180.75 and then at $180.000.
May feeders saw a three-month-old uptrend on the daily bar chart. The next upside price objective for the feeder bulls is to close May futures prices above technical resistance at the February high of $263.125. The next downside price objective for the bears is to close prices below solid technical support at $245.00. First resistance is seen at today’s high of $255.925 and then at Friday’s high of $258.40. First support is seen at today’s low of $250.40 and then at $249.00.
What to do: Get current with feed advice. All production risk in the cash market for now but be prepared for some hedge coverage as we have demand concerns.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market another month through April.
