Recent break in cattle market could stabilize, analyst says
Beef demand could see short-term boost on stimulus checks.
April cattle closed higher yesterday, after an early selloff pushed the market to its lowest level since January 21. The higher close could help stabilize the market after the recent very sharp break. The reopening of the economy, and especially the entertainment and hospitality industry, could spark a short-term burst in beef demand. The USDA boxed beef cutout closed $4.35 lower at $234.68. This was down from $240.29 the previous week and was the lowest the cutout had been since February 15.
Cash live cattle were quiet again on Tuesday, with no trades reported so far this week. Last week the market was mostly steady with the previous week after trending high since mid-January. The USDA estimated cattle slaughter came in at 123,000 head yesterday. This brings the total for the week so far to 243,000 head, up from 241,000 last week but down from 247,000 a year ago.
The market is oversold, and the third vaccine may help boost beef demand as businesses reopen. This should help rationalize the premium over the cash market as traders see the potential $1,400 checks that are part of the stimulus package as a shot in the arm for beef demand. Close-in support for April cattle is at 118.97, with 121.67 and 122.62 as resistance.
Support April hogs may emerge at $84.82 and $83.02, consolidation.
The technical action in the hog market is bearish, but the cash market news is still positive, and the trade is still uncertain over the impact that the reemergence of African Swine fever in China will have on their pork industry. April hogs closed sharply lower on the session yesterday after trading to their lowest level since February 22. The USDA pork cutout, released after the close yesterday, came in at $93.92, up from $91.48 on Monday and $91.30 the previous week. This is the highest the cutout has been since February 25.
The CME Lean Hog Index as of February 26 was 81.90, up from 80.70 the previous session and 77.74 the previous week. The USDA estimated hog slaughter came in at 497,000 head yesterday. This brings the total for the week so far to 990,000 head, up from 986,000 last week and 988,000 a year ago. With the extremely overbought condition, the market seems to be in a position for a technical break, or at least some consolidation.
Traders remain concerned about the potential for ASF issues in China. If these concerns are borne out, China may be a more active importer of pork over the near term. The April premium narrowed sharply yesterday. Close-in support for April hogs is at 84.82 and 83.02, with resistance at 87.25 and 87.90.
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