June Lean Hogs is now the lead contract as its volume has exceeded the volume of the April contract. It opened lower and traded to the session low at 90.80. It turned up and traded to the session high at 92.95. It couldn’t handle the success and pulled back, settling in the middle of the range at 91.875. Cutout weakness on Friday set a negative tone on the open for Monday, with a mid-morning positive cutout value sparking the rally to the high. The enthusiasm didn’t last however, and price pulled back on expectations that the strength in the cutout wouldn’t be sustained. It didn’t… giving back half of its gain. For all the price action on Monday, the range was inside Friday’s range forming an inside candlestick as Friday’s price action was a huge move to the downside and going limit down. Today’s action stayed within the middle of Friday’s range with settlement just about right in the middle of Friday’s range. The low came close to support at the declining 200-DMA at 90.55 and the key level at 90.40. The high failed below Friday’s settlement, keeping bears in control, in my opinion. The cash price action has been disappointing as exports have been good with China reporting imports of 380,000 MT of U.S. pork in January and February, a near 36% increase from year-ago. China’s pork imports increased late last year and there are expectations of a similar climb this year, as China is fighting a new outbreak of African swine fever. Early estimates indicate that 10% of China’s sow herd has been hit with the latest wave of AFS, with official estimates noting 8-15% of the country’s total production could be lost in the current outbreak. This would be good for the US at some point as Europe is a mess with Spain the only country able to increase production, in my opinion and Europe’s’ prices are sky high, including Spain. So, with all this, US cash prices have been mediocre for whatever reason. A failure from settlement could see price revisit support at the aforementioned key levels. If price can hold settlement, we could test resistance at 92.375 and then the Monday high. Resistance then comes in at 93.50.
The Pork Cutout Index decreased and is at 85.88 as of 03/17/2023.
The Lean Hog Index ticked higher and is at 80.01 as of 03/16/2023.
Estimated Slaughter for Monday is 477,000, which is below last week’s 484,000 and above last year’s 469,000.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays (except holiday weeks) and our next webinar will be on Thursday, March 23, 2023, 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.
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