Hogs
Price action: June lean hogs closed $1.075 lower to $99.25 and nearer session lows.
Fundamental analysis: Lean hog futures underwent selling pressure today as prices appear to be entering a sideways trading range. After falling short of testing the April highs late last week, June lean hogs turned lower and now look to trade sideways despite resurgent strength in cash fundamentals. Traders hold a pessimistic outlook on the hog market into the summer and do not anticipate a large seasonal rally judging by the premiums that summer futures currently hold to the index. Stock markets surging back near all-time highs and inflation ticking lower likely play somewhat of a role in that shift in perspective. Consumers are more likely to pay up for beef when things are going well rather than shifting purchases over to pork.
The CME lean hog index is up another 24 cents to $91.26 as of May 15, a fresh for-the-move high. The preliminary calculation puts the index up another 20 cents to $91.46 tomorrow. Strength in pork cutout is spilling over to cash hog prices, helping push the index higher. Pork cutout rose $1.67 to $101.79 at midsession today, driven by strength in loins, ribs and butts, though all cuts posted gains this morning. While it has been bullish to see cutout climb above $100.00, movement has slowed as prices have inched higher. Part of that downtick can be attributed to purchases for Memorial Day features being done. Key will be if grocers return to the cutout market here in the next few days.
Technical analysis: June lean hogs fell for the second straight session as bulls and bears are on a level overall playing field. Support at the 10-day moving average at $99.10 limited the downside today and will remain initial support, with backing from the 40-day moving average at $98.125. Bulls are seeking to break prices back above the psychological $100.00 mark before challenging 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: You should have all corn-for-feed and soymeal needs covered in the cash market through June.
Cattle
Price action: June live cattle rose 75 cents to $212.975, near mid-range. August feeder cattle fell 12 1/2 cents to $297.475 and near mid-range.
Fundamental analysis: The live and feeder cattle markets are pausing to start the trading week, with some corrective buying seen in the live cattle futures market. More of a risk-off trading day in the marketplace today also limited buying interest in cattle futures. However, overall cash cattle and beef market fundamentals remain solid and steep discounts live cattle futures have to the cash market are likely to continue supporting futures.
Cash cattle trade last week averaged $226.45, which is up $1.65 from the week prior and the fifth straight week for all-time record high. Strong consumer and retailer demand will likely continue to give feedlot operators the advantage as cash cattle negotiations commence later this week. The noon report today showed wholesale boxed beef prices higher, with Choice grade up $1.40 to $353.89 and Select up $2.17 to $344.56. Movement at midday was light at 42 loads. The Choice-Select spread is presently $9.33. Cutting margins remain deep in the red as wholesale prices have not kept up with the cash cattle market.
Technical analysis: Bearish “key reversals” down on the daily bar charts occurred last week in June live cattle and August feeder cattle, which is one technical clue that market tops are in place. Still, live and feeder cattle futures bulls have the overall near-term technical advantage. However, price uptrends on the daily bar charts are in jeopardy now. The next upside price objective for the live cattle bulls is to close June futures above resistance at the contract high of $218.625. The next downside technical objective for the bears is closing prices below solid technical support at $205.00. First resistance is seen at $214.00 and then at $215.00. First support is seen at last week’s low of $210.625 and then at $209.00.
The next upside price objective for the feeder bulls is to close August futures prices above technical resistance at the contract high of $303.475. The next downside price objective for the bears is to close prices below solid technical support at $290.00. First resistance is seen at $300.00 and then at $301.325. First support is seen at last week’s low of $295.10 and then at $293.00.
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.