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With strong beef demand, cattle are going to market quicker, analyst says

U.S. beef demand remains exceptional, analyst says.

Cash cattle fundamental news is very positive, tech action weak.

June live cattle futures continue to consolidate in choppy action, even with cash markets working higher and beef prices holding at a historically high level.

Beef demand remains exceptional, and there is still no sign of a short-term peak in prices. Consumer disposable income is very strong, and the barbecue season may be more robust than normal.

There is a shortage of chicken wings, and the poultry industry is struggling to keep up with demand. This could also push more demand to beef.

The USDA boxed beef cutout closed $2.09 higher on Tuesday at $329.92. This was up from $323.34 the previous week and was the highest the cutout had been since June 1, 2020. 

Cash live cattle are trading steady/firm against last week. In Kansas, on Tuesday, 5,822 were reported at $119 to $120 with an average price of $119.40 vs. $119.10 last week. In Nebraska 3,131 head traded at $120 vs. an average of 120.10 last week. In Texas/Oklahoma, 3,107 head traded at $120, as well, vs. an average of $119.32 last week. 

June Cattle closed slightly lower on Tuesday, with an outside day after choppy and two-sided trade. A bounce to Friday’s high failed to attract new buying interest.

The short-term cash fundamental news remains mostly positive, but there continue to be fears that demand could weaken over the near term and that supply could remain ample. With the high price for corn, traders are moving cattle to the market a little more quickly than normal.

Non-fed cattle slaughter and cow slaughter are running a bit higher than normal as well. The discount of futures to the cash market might provide some underlying support. The USDA estimated cattle slaughter came in at 121,000 head yesterday. This brings the total for the week so far to 237,000 head, up from 235,000 last week and 113,000 a year ago.

Market Ideas 

Demand factors are very strong, and the futures hold a discount to the cash market, but the technical action is weak. Uptrend channel support for June Cattle comes in at 116.57, with 119.10 as the next resistance level. August Cattle support is at 119.32, with 121.17 as resistance.

The lean hog market remains in a solid uptrend, as the short-term cash fundamentals remain bullish.

Pork values are at their highest levels since 2014, and until China backs away from the U.S. pork market, the seasonal tightening in supply may be a bullish force.

Restaurant re-openings have helped boost pork belly prices, and rib prices are strong due to enhanced demand for this year’s barbecue season. China’s import demand is likely to decline in the second half of the year, but for now the short-term fundamentals are positive.

The USDA pork cutout, released after the close yesterday, came in at $123.24, up from $120.95 on Monday and $114.20 the previous week. This is up through last year’s extreme and is the highest it has been since October 6, 2014.

June Hogs closed sharply higher on Tuesday after trading to new contract highs. The surge higher in pork cutout values this past week suggests cash markets can continue to work higher over the near term. The CME Lean Hog Index as of May 21 was 111.81, up from 111.43 the previous session and up from 111.42 the previous week. The USDA estimated hog slaughter came in at 485,000 head yesterday. This brings the total for the week so far to 967,000 head, up from 944,000 last week and 417,000 a year ago, which was Memorial Day week. 

Some farmers in China have been fattening hogs since late last year to almost double their normal weight in hopes the animals will generate higher returns should prices rebound. Chinese wholesale pork prices have plunged more than 40% since mid-January. The agriculture ministry said in April that the country’s pig herd may recover to normal levels by June or July, although the number of hogs available for slaughter may take another four months to recover. China’s national average spot pig price as of May 26 was down 48% since the start of the year.

Market Ideas

Close in support for June Hogs is at 113.80, with 117.70 as the next upside target. The next upside target for October hogs is at 94.10.  

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