Hogs
Price action: April lean hog futures sank $2.025 to $85.575 and closed near session lows. Deferred contracts posted milder losses.
Fundamental analysis: Lean hog futures saw heavy selling today, driven by weakening technicals. April lean hogs struggled and failed to break above the early March highs, spurring technical selling pressure today despite stabilizing cash fundamentals. The CME lean hog index is up 4 cents to $89.32 as of March 17. The preliminary calculation puts the index up another 9 cents to $89.41 tomorrow. While the index is poised for another modest gain, the second day in the calculation indicates modest weakness is likely to return. Weaker cash hog prices reflect persistent weakness in pork cutout. Cutout fell on stronger-than-expected slaughter last week, which topped year-ago for the first time since January. That could be the case again this week, although the relatively large year-ago figure at 2.521 million makes that less likely. Still, pork cutout bounced 18 cents at midsession to $95.82, effectively confirming firm support at $95.00, which has limited the downside in cutout nearly all of this year. Strength in bellies led cutout higher this morning.
Technical analysis: April lean hog futures opened lower this morning and saw persistent selling pressure throughout the session. Bulls and bears are on an overall level playing field. Bulls are looking to overcome initial resistance at $86.10 before tackling resistance at this week’s high close at $88.075. Continued selling pressure targets support at $85.625, which is quickly backed by psychological support at $85.00.
What to do: Get current with feed coverage.
Hedgers: You are carrying all production risk in the cash market.
Feed needs: You have all corn-for-feed needs covered in the cash market through March. You have all soymeal needs covered in the cash market through April.
Cattle
Price action: Anticipation of continued supply tightness powered the cattle/beef complex still higher Wednesday. Nearby April live cattle surged $1.45 to $206.825, while April feeders climbed $2.175 to $286.725. Expiring March feeders, which expire on March 27, rallied $1.85 to $286.825.
Fundamental analysis: Cash trading of fed cattle remained completely stalled Tuesday, with the USDA again reporting a total lack of activity. Packers are clearly trying to hold the line after having had to boost bids over $5.00 last week. However, this morning’s wholesale action, if it is sustained, could give them the room to again raise bids to cattlemen. That is, choice cutout leapt $6.02 to $329.34 this morning, whereas select cutout slipped $1.00 to $308.23. The width of the choice-select spread, now at $21.11, reflects the extreme tightness of the current beef situation. On the other hand, this morning’s surge may have marked the apex of short-term grocer buying, since monthly patterns regularly show they back away from the wholesale market after the second-last Wednesday of the month (which reflects their strong penchant for featuring beef most actively over the first weekend of the month following).
The industry may also be anticipating bullish results of Friday’s USDA Cattle on Feed report. As noted Tuesday, at least one wire service survey indicates that while February large-lot (1,000-plus head) marketings fell to just over 91% of year-ago, last month’s average placement estimate is almost 15% under year-ago. The net result of those estimates is a March 1 feedlot population figure about 2% under its 2024 counterpart.
The shortage of yearlings available to the feedlot industry also remains severe, as indicated by the CME feeder index rising 84 cents to another all-time high at $284.11. Recent corn slippage, implying cheaper feed costs, is also encouraging demand for replacement yearlings.
Technical analysis: The bulls retain full control of the short-term technical outlook for April live cattle futures, especially after the contract made a run at its late-January contract high of $207.725. That quote serves as backing for initial resistance at today’s high of $207.15. Expect stiffer resistance at the February contract’s all-time front-month high of $209.35, then at the psychological $210.00 level. Look for initial support at today’s low of $204.975, which essentially marks robust psychological support at the $205.00 level. A close below that point would have bears targeting the pivotal $200.00 level.
The expiring March feeder cattle contract reached a record nearby contract record at $287.30. Bulls are clearly dominating the short-term technical outlook in next-nearby April feeder futures. Initial resistance stands at the new high of $287.225, with limited prospects for added resistance below the psychological $290.00 level. Expect initial support at Tuesday’s high of $285.30, with stout backing from the psychological $285.00 level. That’s backed by today’s low of $284.375. A close below that point would have bears targeting psychological support at the $280.00 level.
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 have all corn-for-feed needs covered in the cash market through March. You have all soymeal needs covered in the cash market through April.