Strong fundamentals are driving cattle prices higher, but hogs need a boost

June Live Cattle Futures (LEM26) last Friday rose $1.825 to $253.90 and over the week they are up $5.00. May feeder cattle futures (GFK26) gained $3.45 to $361.45 and were down $2.775 for the week. Prices were trading slightly mixed in early trading on Monday, with live cattle slightly higher and feeders modestly lower.

June live cattle futures closed Friday at a technically bullish weekly high, suggesting some buying interest from speculators based on tracking charts earlier this week. Futures markets saw buying interest on Friday as spot cattle prices last week continued to rise despite elevated meat prices at the meat counter. The USDA reported at midday Friday an active cash cattle trade for the week, with steers averaging $262.77 and heifers averaging $262.32. This compares to the previous week’s average cash cattle trade, which was $258.52.

More Barchart news

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

Despite recent increases in cattle cash prices, beef packers’ margins remain in the red, which may limit slaughter levels in the near term as packers look to keep cash trading stable or lower.

The historically tight supply of feedlot-fed cattle will continue to provide underlying support to spot cattle, futures and beef prices, especially with the outdoor grilling season underway.

A concern for livestock markets and livestock producers continues to be retail gasoline prices, which hover around $4.50 a gallon or more in most locations. However, with US stock indices at or near record levels, US consumer confidence could remain optimistic in the coming months.

Lean Hog ​​Futures Caught in Bearish Price Trend on Daily Chart

June lean hog futures (HEM26) fell $0.775 to $98.75 on Friday, near a session low, but are up 12.5 cents for the week. Futures prices on Monday morning posted short-covering gains.

Lean hog futures market bears are in firm technical control amid a firmly established downtrend on the daily bar chart. This suggests that the path of least resistance for prices will remain sideways and will decline in the short term.

The latest CME Lean Hog ​​Index is down 2 cents at $90.46. The national direct cash hog five-day moving average price quote for Friday was $94.50.

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

Pork market bulls continue to hope for better pork replacement demand at the meat counter as retail beef prices remain historically high.

A smaller breeding herd in the United States and declining slaughter levels in the second and third quarters of this year should provide a floor for spot and futures hog prices. Export demand for U.S. pork has not been as strong. Improving U.S.-China relations 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 in improving U.S. pork exports to China in the coming months, as both sides appear to want stable trade between the world’s two largest economies. Trump and other administration officials said last week that China will buy “billions” of dollars in American agricultural products.

Tell me what you think. I enjoy hearing from my valued Barchart readers around the world. Email me at jim@jimwyckoff.com.

As of the date of publication, Jim Wyckoff had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com