June Lean Hogs continued its impressive rally on Friday, making another new high for the recent up move and ending the week near the high. It gap opened higher, closed the gap and then rallied the rest of the session to the high at 108.00. The low came in at 105.375 and settlement was at 107.90. The hog cash market also continues to impress as exports and US consumer demand are strong. Grocery stores have been making more space for pork products as consumers have been flocking to the cheaper meat protein. With the grilling season coming, and pork stocks tight, cutouts and cash prices have risen more than analysts estimated. The impressive run for the cutout carcass prices has taken place largely without the help of the pork belly as it has been up and down and not establishing itself, in my opinion. Someone told me that bacon demand has come down as egg prices have risen, as people are avoiding bacon and egg sandwiches due to the higher egg prices. If slaughter numbers decline seasonally, it could put more upward pressure on cash prices as supply should tighten further. Hogs continue to build its premium over the index so, we must, in my opinion continue to see cash move higher or we could see price falter in the futures. I don’t think we are there yet but watch for the rubber band being stretched too tight. The futures high ticked past resistance at 107.925 and settlement was a tick below it. This could key trade on Monday. If price can overcome resistance at 107.925, it could test resistance at 109.85. A failure from settlement could see price test support at 106.85.
The Pork Cutout Index increased and is at 96.10 as of 04/04/2024.
The Lean Hog Index increased and is at 85.88 as of 04/03/2024.
Estimated Slaughter for Friday is 485,000, which is above last week’s 442,000 and last year’s 431,777. Saturday slaughter is expected to be 107,000, which is above last week’s 16,000 and last year’s 8,494. The estimated slaughter for the week (so far) is 2,421,000, which is above last week’s 2,404,000 and last year’s 2,369,660.
May Feeder Cattle was crushed on Friday, getting slammed all the way down through support at the rising 100-DMA on the continuous chart at 236.875 to the low at 236.675. Support held and it settled at 238.175. The high came in at 243.95. Settlement was below the key level at 238.35 so the pressure on the May contract remains. The cash index has remained stable, but it looks like feeder buyers are taking a longer look as prices pulled back on light trading on Friday. The tail is waving the dog. If futures fail from settlement, we could re-test support at 237.25 and the rising 100-DMA. Support then comes in at 235.95.
The Feeder Cattle Index decreased and is at 248.97 as of 04/04/2024.
June Live Cattle fell to a 3-month low on Friday, getting down to 171.40 and settling near the low at 172.05. The high was a t 175.925. The bird flu continues, in my opinion to be the dominant theme for futures traders as it seemed the didn’t want to hold onto long positions going into the weekend on fear of the outbreak expanding. This is with there being no evidence that I have seen that is even hitting beef cattle. It has from what I have seen reported infected some older dairy cows and it suppresses milk production by around 10 to 20% while they are sick for 10 to 20 days. It did get passed to a huma in Texas who drank unpasteurized milk from one of the sick dairy cows. His infection was reported as so serious as he came down with pink eye. Wow. It doesn’t seem to have the same impact on mammals as birds but there some in the medical alarmist community that have said it could be worse than the Wuhan flu. This continued to put futures traders on edge and they came out selling and didn’t stop until it closed. Packers were finally able to get some producers down south to sell some cattle at lower prices with live cattle trading down to 183.00 on Friday. Traders are also worried about cutout prices that have taken an about face and have fallen below 300.00 in a time when grocers should be aggressively buying beef to prepare for grilling season. Maybe, they have taken a page out of the packers’ hand-book where they say I don’t need any cattle but I will bid for them down here if you want to sell. Afterall, there is a sickness going around and I don’t really want the product. But I will buy it here… Futures closed below the key level at 172.75. This keeps the pressure on futures. If futures fail from settlement, it could test support at 170.375. Support then comes in at 168.625. If futures hold settlement, it could test resistance at 172.75. Resistance than comes in at 174.425.
Boxed beef cutouts were mixed as choice cutouts ticked higher 0.02 to 297.17 and select decreased 1.35 to 294.70. The choice/ select spread widened and is at 2.47 and the load count was 136.
Friday’s estimated slaughter is 115,000, which is above last week’s 98,000 and last year’s 101,979. Saturday slaughter is expected to be 20,000, which is above last week’s 5,000 and last year’s 10,921. The estimated total for the week (so far) is 609,000, which is above last week’s 586,000 and last year’s 604,551.
The USDA report LM_Ct131 states: For Friday in the Texas Panhandle negotiated cash has been moderate on trade and demand. Compared to last week live FOB purchases traded 2.00 lower at 184.00. In Kansas negotiated cash trade has been moderate on trade and demand. Comparted to last week live FOB purchases traded 1.00-2.00 lower from 183.00-184.00. In Nebraska negotiated cash trade has been slow on light demand. The most recent live FOB market was Thursday with purchases at 187.00 and dressed delivered purchases from 296.00-297.00. In the Western Cornbelt negotiated cash trade has been slow on light demand. The most recent live FOB purchases traded at 187.00, with dressed delivered purchases at 297.00.
The USDA is indicating cash trades for live cattle from 183.00 – 188.00 and from 295.00 – 298.00 on a dressed basis (so far).
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, April 09, 2024, at 3:00 pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon completion of the webinar.
**Call me for a free consultation for a marketing plan regarding your livestock needs.**
Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
Direct: 312.957.4163
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