Cattle market probes for short-term low, analyst says
The live cattle market is still probing for a short-term low, while beef continues to advance.
Perhaps the selling pressures in the live cattle market will slow with the strong advance in beef prices and the sharp break in grain prices of the past few sessions.
High grain prices have been encouraging feedlots to sell cattle sooner, and weight data suggest that there is ample supply. The threat of a short-term bulge in beef production has helped trigger a sharp break off the April 8 peak, and the live cattle market is now probing for a short-term low with an oversold technical condition.
The USDA boxed beef cutout was up $4.52 at mid-session, yesterday, and closed $5.79 higher at $290.99. This was up from $278.26 the previous week and was the highest the cutout had been since June 3, 2020.
A very strong demand tone for beef in the weeks just ahead should provide underlying support. The USDA estimated cattle slaughter came in at 121,000 head yesterday. This brings the total for the week so far to 238,000 head, down from 240,000 last week but up from 152,000 a year ago.
Cash live cattle traded in light trade, yesterday, about $2-$3 lower than last week. The reopening of the economy is causing aggressive new bookings by retailers and the food service industry.
Beef prices are the highest they have been since June, and this leaves packers wanting live inventory. The market looks vulnerable to a corrective bounce with the hook reversal on Monday. Close-in support for June Cattle comes in at $115.72, with $118.77 and $120.07 as resistance. August Cattle support is at 116.72, with 119.17 as resistance.
Will need to see continued strong exports to rationalize more upside.
Short-term domestic demand factors remain positive for lean hogs, if the export market stays strong. If export demand slows, the U.S. will need to absorb extra production. High feed prices may encourage producers to sell sooner. This is a short-term negative force, but it should help keep producers current and allow average weights to decline.
June Lean Hogs closed slightly lower yesterday after trading moderately lower early in the session due to a continued surge in corn prices. With an oversold technical condition and the June contract trading discount to the cash market, a recovery in pork cutout values might be enough to spark decent buying.
The USDA pork cutout, released after the close yesterday, came in at $108.61, up from $107.31 on Monday but down from $113.52 the previous week. The CME Lean Hog Index as of April 23 was $107.17, up from 106.51 the previous session and $103.76 the previous week.
The USDA estimated hog slaughter came in at 486,000 head yesterday. This brings the total for the week so far to 969,000 head, down from 970,000 last week but up from 586,000 a year ago.
China's national average spot pig price as of April 28 was down 0.13% from the previous day. Prices are down 2.2% for the week, 8.7% for the month and down 35% year to date.
TODAY'S MARKET IDEAS
June hog support is at $105.50 and $104.42, with $109.40 and $110.07 as resistance. Taking out support would sour the chart pattern. August hog support is at $100.37, with $103.55 as next resistance.
For daily updates on cattle, hogs, corn, wheat and the soy complex, visit https://www.hightowerreport.com.