Hogs
Price action: June lean hogs rose $1.75 to $97.025, nearer the daily high.
Fundamental analysis: The lean hog futures market today saw short covering after prices Monday hit a nearly four-week low. Overall friendly cash and pork market fundamentals are also supportive for futures prices, despite some early-week losses in the cash index and in fresh pork cutout value.
Last week’s USDA Hogs and Pigs report suggests hog supplies will decline marginally below year-ago levels during the second half of April and stay that way through most of the spring and summer. Also, grilling-season demand for pork chops, ham and pork steaks, brats and ribs should keep pork prices elevated, especially with retail beef prices at historically high levels.
The latest CME lean hog index quote is down another 28 cents to $88.50 as of March 28. Monday’s cash index is projected up 15 cents to $88.65. The national direct five-day rolling average cash hog price quote today is $87.92.
The noon report today showed pork cutout value fell 53 cents to $96.92, led by losses in bellies. However, movement at midday was solid at 201.96 loads, which suggests still-robust consumer demand for pork at the meat counter.
Technical analysis: Lean hog futures bulls and bears are on a level overall near-term technical playing field amid recent choppy trading. The next upside price objective for the hog bulls is to close June prices above solid chart resistance at the March high of $99.70. The next downside price objective for the bears is closing prices below solid technical support at the March low of $92.00. First resistance is seen at today’s high of $98.025 and then at $99.00. First support is seen at $96.00 and then at $95.00.
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 April. You have all soymeal needs covered in the cash market through May.
Cattle
Price action: Surging beef prices spurred fresh gains in cattle and feeder futures Tuesday. Expiring April live cattle climbed $1.325 to $209.125, while most-active June futures surged $1.775 to $205.425. Nearby April feeder futures advanced $1.825 to $288.275 and most-active May jumped $2.65 to $287.15.
Fundamental analysis: The cyclically tight cattle and feeder situation, along with restrictions on imports of Mexican cattle due to the screw worm threat, continue supporting prices at or near record levels. Whether producers will prove able to force beef packers to raise their fed cattle bids to fresh highs remains to be seen. Cash trading was minimal Monday, with a lot of mixed steers and heifers changing hands at $210.00. But today’s midsession beef result, as well as the futures advance, strongly suggest cattlemen will not be quick to abandon higher asking prices. Choice cutout soared $7.60 to $342.86, while select cutout rose “just” $2.20 to $322.21. This strongly implies demand from consumers and grocers remains extremely strong. We still regard potential retail price increases that would strangle consumer demand as the biggest danger to the cattle/feeder price outlook.
The feeder index has slipped lately, with Monday’s late quote (for Friday) falling 91 cents to $286.76. Thus, the market remains slightly below the March 20 record of $287.78. But given the persistence of restrictions on imports of Mexican feeders, as well as the market’s history of mid-year seasonal strength, we would be surprised if yearling prices don’t move still higher.
Technical analysis: Bulls clearly hold the short-term technical advantage in June live cattle futures, especially after today’s close marked the second highest for the contract. Look for a band of resistance extending from today’s high of $205.65, to last Friday’s high at $206.35, then to March 21 contract high of $207.30. A breakout above that point would have bulls targeting the psychological $210.00 level. Initial support at the 10-day moving average near $203.79 is backed by today’s low of $202.60, then the 20-day moving average near $200.54 and the psychological $200.00 level. A drop below the latter would open the door to a test of 40-day moving average support near $195.96.
Today’s May feeder futures advance above the 10-day moving average near $285.91 confirmed the bullish dominance of the short-term technical situation, as well as establishing that moving average as initial support. That’s stoutly backed by the daily low of $283.325 and the contract’s 20-day moving average near $283.01. Look for solid support at the $280.00 level as well. Initial resistance was established by the daily high of $287.50 with the strong close pointing bulls at the psychological $290.00 level and the March 21 contract high of $290.625.
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 April. You have all soymeal needs covered in the cash market through May.