Strong Fundamentals Are Pushing Cattle Prices Higher, But Hogs Need a Boost

June live cattle (LEM26) futures last Friday rose $1.825 to $253.90 and for the week were up $5.00. May feeder cattle (GFK26) futures gained $3.45 to $361.45 and on the week were down $2.775. Prices were trading narrowly mixed in early dealings Monday, with live cattle modestly up and feeders modestly down.

June live cattle futures on Friday closed at a technically bullish weekly high, suggesting some follow-through chart-based buying interest from the speculators early this week. Futures markets saw buying interest Friday as cash cattle prices last week continued to rise despite elevated beef prices at the meat counter. The USDA at midday Friday reported active cash cattle trading on the week, with steers averaging $262.77 and heifers $262.32. That compares to the prior week’s average cash cattle trade at $258.52.

More News from Barchart

Still overall bullish technicals and supply and demand fundamentals continue to support buying interest in cattle futures markets.

Despite the gains in cash cattle prices recently, beef packer margins continue to be in the red, which may limit slaughter levels in the near term as packers look to keep cash trade steady to lower.

Historically tight fed cattle supplies on feedlots will continue to provide underlying support to cash cattle, futures and beef prices, especially with the outdoor grilling season under way.

A worrisome element for cattle markets and cattle producers remains retail gasoline prices that are around $4.50 a gallon, or above, in most locations. However, with U.S. stock indexes at or near record highs, U.S. consumer confidence in the coming months could remain upbeat.

Lean Hog Futures Trapped in a Price Downtrend on Daily Chart

June lean hog (HEM26) futures on Friday fell $0.775 to $98.75, near the session low, but for the week were up 12 1/2 cents. Futures prices on Monday morning were seeing short-covering gains.

The lean hog futures market bears are in firm technical control amid a price downtrend firmly in place on the daily bar chart. That suggests the path of least resistance for prices will remain sideways to lower in the near term.

The latest CME lean hog index is down 2 cents to $90.46. The national direct five-day rolling average cash hog price quote for Friday was $94.50.

Lean hog futures bulls have been spooked by the recent case of pseudorabies reported in a small facility in Iowa, which traced back to an outdoor herd in Texas with likely exposure to feral swine. Mexico last week banned some pork product imports due to the pseudorabies case in Iowa.

Hog market bulls continue to hope better substitution demand will occur for pork at the meat counter, as retail beef prices remain historically elevated.

A smaller U.S. breeding herd and declining slaughter levels into the second and third quarters of this year should provide a floor under cash hog and futures prices. Export demand for U.S. pork has been less than robust. Improving relations between the U.S. and China in the coming months would likely mean better demand for U.S. pork from China. Last week’s meeting between President Donald Trump and Chinese President Xi Jinping could be a positive element for better U.S. pork exports to China in the coming months, as the two sides appear to want stable trade between the world’s two largest economies. Trump and other administration officials last week said China will buy “billions” of dollars’ worth of U.S. ag products.

Tell me what you think. I enjoy hearing from my valued Barchart readers from all around the globe. Email me at [email protected].

On the date of publication, Jim Wyckoff did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com