Hogs
Advice: We advise livestock producers to extend corn-for-feed coverage by one month in the cash market through April. We also advise livestock producers to extend meal coverage by one month in the cash market through May.
Price action: June lean hog futures climbed 30 cents to $96.55 and closed near mid-range. Nearby April futures rose 90 cents to $87.55.
Fundamental analysis: Hog futures posted modest strength again today, struggling to build on recent strength in cash fundamentals. Prices continue to chop in the sideways range that has capped the moves in the past couple of weeks and that is likely to continue into tomorrow’s release of the USDA’s quarterly Hogs & Pigs Report from USDA. Traders are likely shoring up positions ahead of that catalyst, which helps explain the recent divergence of futures price action from the cash market. The CME lean hog index is up 11 cents to $88.90 as of March 24. The preliminary calculation puts the index up another 23 cents to $89.13 tomorrow. Recent strength in cutout, which rose to over $100.00 yesterday in early trade, has led to resurgent strength in the index. Though cutout pulled back to $97.55 in afternoon trading yesterday, movement surged to 375.51 loads, a bullish sign. At midsession today, cutout rose $1.81 to $99.36, while movement remained quite strong at 188.5 loads. Persistent grocer and consumer demand, noted in yesterday’s Cold Storage Report that showed pork stocks rising less then normal in February, is likely to continue to underpin hog prices, likely lending support barring any surprise on Monday.
Technical analysis: June lean hog futures continue to chop in a sideways range as bears retain a slight technical advantage. Bulls are ultimately looking to overcome resistance at $99.70, the March 17 high, which marks the upper end of the recent range. Additional resistance stands at $98.70, the 40-day moving average, and $96.85 on the way. Bulls are seeking to hold support at $95.80 then the March 24 low of $94.50, which marks the lower end of the recent range.
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 coverage by one month in the cash market through April. Also extend meal coverage by one month in the cash market through May.
Cattle
Advice: We advise livestock producers to extend corn-for-feed coverage by one month in the cash market through April. We also advise livestock producers to extend meal coverage by one month in the cash market through May.
Price action: Cattle and feeder futures traded higher Wednesday, with nearby April live cattle rising 70 cents to $207.075. Most-active May feeder futures advanced $1.05 to $285.175, while the expiring March contrast slipped 17.5 cents to $286.80.
Fundamental analysis: Traders are still trying to gauge the short-term outlook for the cash cattle market after prices rocketed over $7.00 higher to $212.76 last week. Such large cash moves are often viewed as signaling the nearness of a blow-off market top, which at least partially explains the sizeable discounts still built into the nearby futures contracts. For example, despite rising about 75 cents today, April live cattle futures still ended the day well over $5.00 below last week’s cash average. The fact that 519 head of steers changed hands at $208.00 in Kansas yesterday also encouraged bearish ideas about the short-term outlook.
However, bulls still seem to hold the upper hand from a fundamental standpoint, especially after choice beef cutout followed Tuesday’s $8.00 leap above $335.00 with a $2.77 rise to $337.96 at noon today. This puts beef values in greatly elevated territory, as that quote is quite close to the twin weekly highs of 2021 and the matching peak reached in summer 2023. We think there’s a very strong chance the likely high reached this spring or summer will represent the second highest peak behind only the Covid-driven spike seen in spring 2020. Thus, we think cash cattle values also have at least modest upside potential from current record highs.
That is probably even more true for calf and yearling values due to the ongoing embargo on Mexican animals as that country and the U.S. fight to prevent the screw worm from returning to the U.S. after it was eradicated in the twentieth century. This is exacerbating the ongoing cyclical shortage of younger animals, best indicated by the latest quote for the CME feeder index at $287.25, second highest after last Friday’s record at $287.78. We see little reason to think the rise won’t continue in the days and weeks ahead.
Technical analysis: Bulls still own the short-term technical advantage in nearby April live cattle futures, especially after bears proved unable to force a significant dip below initial support at the 10-day moving average, now near $201.79, today. That’s backed by psychological support at the $200.00 level, then by Tuesday’s low at $199.60. A drop below that area would have bears targeting the pivotal 40-day moving average near $195.10. Today’s high marked initial resistance at $203.375, which is backed by the psychological $205.00 level, as well as last Thursday’s (3/20) high of $205.20. Look for psychological resistance at last Friday’s contract high at $207.30.
Bulls hold the short-term technical advantage in most-active May feeder futures as well. Bull’s ability to force a close above the 10-day moving average near $285.075 confirms initial support at the level, but the daily high implies initial resistance at $285.875. A breakout above that point would have bulls targeting resistance at Monday’s and last Friday’s highs of $288.65 and $290.63, respectively. Today’s low places added support at $283.40, with stronger backing at yesterday’s low of $280.675. Expect vigorous support at the psychological $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: NEW ADVICE -- Extend corn-for-feed coverage by one month in the cash market through April. Also extend meal coverage by one month in the cash market through May.