Cattle market to remain in uptrend, analyst says
Seems to have cash fundamentals for more up ahead.
With a very strong demand outlook as the beef pipeline expands and consumer spendable income hits a peak, the market looks to remain in a short-term uptrend. Traders see consumer demand indicators as being as good as they get.
Seasonal increases are expected in the weeks ahead, and it is enhanced this year by Covid relief checks and the strong urge for consumers to get out after a year of restrictions. Corrections due to the premium structure of futures above the cash may represent buying opportunities.
The USDA boxed beef cutout closed $5.30 higher on Tuesday at $244.83. This was up from $233.99 the previous week and was the highest the cutout had been since November 20. Cash live cattle trade was quiet on Tuesday, except for 914 head that traded in Texas/Oklahoma at 116.11. This was up from 115 last Thursday and was the highest they had been since June.
April cattle closed unchanged on Tuesday, and June cattle closed lower with an inside trading session. The USDA estimated cattle slaughter came in at 120,000 head yesterday. This brings the total for the week so far to 239,000 head, up from 233,000 last week and 238,000 a year ago.
The short-term cash news remains positive, as higher beef prices, a seasonal increase in demand and aggressive government stimulus for consumers should help support higher cash cattle trade. April cattle support moves up to 120.27, with 122.35 and 123.37 as next resistance. Consider buying setbacks. June Cattle support is at 121.45, with 124.45 as next target.
Still probing for peak and still reacting to USDA report.
June hogs closed moderately higher on the session on Tuesday after trading to new contract highs. A continued strong advance in pork prices combined with a seasonal decline in production continues to lend support. So far, exports have remained strong, and the market is in position to see a continued advance in the cash prices. The USDA pork cutout, released after the close yesterday, came in at $105.30, down $1.21 from $106.51 on Monday but up from $104.28 the previous week.
Traders are still absorbing the news from the USDA that pork supply is about 2% below trade expectations. The seasonal decline in production along with strong demand from the reopening of restaurants and food service industry has also lent support. The CME Lean Hog Index as of March 26th was 97.38 up from 95.97 the previous session and up from 92.71 the previous week. The USDA estimated hog slaughter came in at 490,000 head yesterday. This brings the total for the week so far to 973,000 head, up from 946,000 last week down from 986,000 a year ago.
There is significant divergence in the RSI with the contract highs posted on February 24, March 17, and March 26. Relative strength has been lower on the marketís recent moves to contract highs, suggesting a loss in the upside momentum.
China's national average spot pig price as of March 31 was down 1.3% from the previous day. Prices are down 4% for the week, 9% for the month and 29% year to date. Dalian live hog futures are down 1.7% for the week and 7% for the month. If there was a major resurgence of ASF, prices would likely be trending higher, not lower.
June hog support is at 104.45, with 106.67 as the next target. Watch for a technical sign of a peak soon.
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