Hogs
Price action: April lean hogs surged $2.35 to $84.70 and settled nearer session highs.
Fundamental analysis: Lean hog futures gapped higher on this morning’s open and saw followthrough strength throughout today’s session. Steep discounts to the cash market and a favorable risk attitude across the marketplace played a role in the strength seen across the hog complex today. The market will remain keyed in on newswires as the tariff situation remains rather fluid. Key will be maintaining a longer term perspective. If current plans hold in place, it could mean a significant reduction in export demand, given three of the top five importers of U.S. pork are involved with recent trade talks. The CME lean hog index is up another 28 cents to $90.22 as of March 3, marking the third consecutive daily gain. Choppy action persists in the index though, as tomorrow’s quote comes in 2 cents lower to $90.20. Still, with April futures trading well below the index and strong action in the cash market could lead to additional strength in the latter portion of the week. Pork cutout poked above the $100.00 mark at midsession, climbing $2.36 to $100.13. Strength in bellies led cutout higher.
Technical analysis: April lean hog futures posted strong gains this morning, though bears maintain the technical advantage. The psychological $85.00 mark limited strength this morning and will serve as initial resistance. Strength above that mark has bulls targeting the 10-day moving average at $85.71. On a reversal back lower, tentative support lies at $83.70, though bulls would ultimately be targeting yesterday’s for-the-move low of $80.725.
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: The cattle and feeder complex posted big gains again Wednesday. April live cattle surged $1.90 to $196.55, while most-active April feeder futures jumped $3.575 to $276.075.
Fundamental analysis: The fed cattle market continued its bullish reversal begun early this week, with the move likely reflecting growing anticipation of a seasonal rebound from the late-February breakdown. The cash market probably isn’t driving the futures strength, as there has been very little trading occurring so far this week. That is, after falling $1.99 to $197.65 last week, trading in the five-market area has been minimal. A few (36 head) changed hands at $195.00 in Iowa-southern Minnesota Monday, with 390 trading at that level in Kansas yesterday. Given the sharp April futures reversal from three-month lows Tuesday, as well as today’s vigorous follow-through, producers are not going to be at all amenable to taking lower cash bids through the balance of the week. Conversely, a sharp bearish futures reversal might change the market dynamic Thursday or Friday.
The wholesale market isn’t encouraging bears either, with choice cutout having rebounded to $314.87 Tuesday before falling 70 cents to $314.17 at noon today. The choice-select spread widened to $11.41, thereby indicating the supply of high-quality beef remains tight. We don’t see that changing much in the short-run, since cattle slaughter typically remains seasonally very low at this time of year. The wholesale strength seemingly reflects improved grocer demand, although having the first weekend in April arrive in the middle of Lent, along with the late arrival of Easter, suggest preliminary demand for grilling season remains subdued.
Meanwhile, the price of feeder cattle remains very high, but the feeder index has fallen to $278.75 after having climbed to $281.06 last Thursday. The cash drop likely played a role in the losses seen since early last Friday, but the subsequent futures bounce suggests the midwinter uptrend is set to resume.
Technical analysis: Bears retain the short-term technical advantage in April live cattle futures for the moment, due to the simple fact that bulls have yet to challenge pivotal resistance at the contract’s 40-day moving average near $197.80. That closely backs initial resistance marked by today’s high of $197.225. Conversely, a breakout above the 40-day moving average would have bulls quickly targeting the psychological $200.00 level. Look for initial support at the contract’s 20-day moving average of $195.50, which in turn is backed by psychological support at $195.00 and the 10-day moving average near $194.60. A close below the latter would open the door to a fresh test of the psychological $190.00 level.
Today’s April feeder futures’ rebound confirmed the technical advantage held by bulls. The quick rebound back above the psychologically important $275.00 level reestablished that point as initial support, with the daily low confirming solid backing at $272.55. Expect a strong backing between the contract’s 10-, 40- and 20-day moving averages near $272.27, $270.19 and $269.66, respectively. Initial resistance at today’s high of $276.50 is reinforced by last Friday’s (2/28) high of $276.825. Expect stiffer resistance at the Jan. 29 high of $279.02, then 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: 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.