Hogs
Price action: April lean hogs fell 82 1/2 cents to $86.575, nearer the daily low and hit a three-week low.
Fundamental analysis: The lean hog futures market was pressured again today by chart-based selling from the speculators as the near-term technical posture for April hogs has turned bearish in a hurry. Cash and fresh pork market fundamentals have also deteriorated just recently. The latest CME lean hog index is down 85 cents to $89.68 as of Feb. 21. Wednesday’s cash hog index projection is down another 21 cents at $89.47, for the third straight day of a lower index price. Traders anticipate recent weakness in the cash hog market will continue as April futures continue to trade at a discount to the cash index. The national direct five-day rolling average cash hog price quote today is $91.69. Today’s noon report showed pork cutout fell $1.85 to $96.58, led by losses in loins and bellies. Pork cutout led cash hog prices lower last week and it helped to pressure futures prices today.
Technical analysis: Lean hog futures bulls have lost their overall near-term technical advantage amid the recent steep price downdraft. The next upside price objective for the hog bulls is to close April prices above solid chart resistance at $90.00. The next downside price objective for the bears is closing prices below solid technical support at the January low of $84.50. First resistance is seen at today’s high of $87.65 and then at $89.00. First support is seen at $86.00 and then 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 should have all soymeal needs covered in the cash market through March. You are hand-to-mouth on corn-for-feed needs.
Cattle
Price action: April live cattle futures climbed 62.5 cents to $195.725 and closed near mid-range. March feeder cattle futures rallied $1.925 to $274.225, closing nearer session highs.
Fundamental analysis: Cattle futures continue to work higher as sentiment has recently favored the bulls, thinking a cash market low is near. February futures are trading around steady to just above the cash market with expiration looming this week. That indicates that traders believe the recent weakness seen in the cash cattle market is coming to at least a pause. That idea is further reinforced by recent strength in wholesale beef. After facing sustained weakness since the end of January, wholesale beef prices have bounced the past couple of days. After rising Monday, choice cutout rose another $1.99 at midsession today to $315.72, while select climbed $2.20 to $306.17. As packers have actively cut back on slaughter, dressed weights have moved back near record highs, offsetting at least a portion of the slaughter cuts. While packer margins remain in the red, the recent bounce in beef is at least encouraging that a near-term low could be near.
Feeder futures continue to tighten discounts to the Feeder Cattle Index. Strength returned to the index over the course of the past week, as the index is most recently 55 cents higher to $279.37. That is just below the highs seen at the end of January. Persistent cash market strength in feeders is likely to continue to underpin feeder futures.
Technical analysis: April live cattle futures posted gains for the third consecutive session. Bears continue to hold a modest technical advantage on the daily bar chart, but their edge has waned in recent days. Bulls are looking to overcome resistance at $196.35, the 40-day moving average, which capped gains today. Strength above that mark targets resistance at $197.525. Support comes in at $195.00 then the 100-day moving average at $193.45, which capped losses last week.
March feeders continue to show relative strength compared to fats. Bulls retain a slight technical advantage on the daily bar chart. Bulls are targeting resistance at $275.00, which is reinforced by resistance at $278.25. Support comes in at $272.00 then the 10-day moving average at $269.75.
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 soymeal needs covered in the cash market through March. You are hand-to-mouth on corn-for-feed needs.