June live cattle (LEM26) futures on Friday fell $1.15 to $248.90 and for the week were down $4.10. May feeder cattle (GFK26) futures rose $1.05 to $367.375 and on the week were down $4.025. The live cattle and feeder cattle futures markets on Friday saw technically bearish weekly low closes as the bulls are fading, technically.
Selling interest in live cattle futures Friday was limited by solidly higher cash cattle prices late last week. The USDA at midday on Friday reported active cash cattle trading, with steers averaging $258.32 and heifers $258.05. The agency early last week reported cash trading the week prior averaged $255.02.
Still overall bullish technicals and supply and demand fundamentals will continue to lean supportive for the cattle futures markets and likely keep a floor under prices that is not too far below current levels.
Despite the gains in cash cattle prices recently, beef packer margins continue to be firmly in the red, which is likely to limit slaughter levels in the near term as beef packers look to keep cash cattle prices 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 still-worrisome element for cattle market bulls and for cattle producers is retail gasoline prices that are well above $4.00 a gallon on average, and in many locations approaching $5.00. 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 Bears in Firm Control
June lean hog (HEM26) futures on Friday fell $0.75 to $98.625 and hit a five-month low. For the week, June hogs were down $2.65. The lean hog futures market bears are in firm technical control amid a price downtrend in place on the daily bar chart and gained more chart strength by producing a bearish weekly low close last Friday in the June contract.
The latest CME lean hog index is down 17 cents to $91.02. Today’s projected cash index price is down another 17 cents to $91.02. The national direct five-day rolling average cash hog price quote for Friday was $95.11.
Lean hog futures have been pressured by the reported case of pseudorabies in a small facility in Iowa, which traced back to an outdoor herd in Texas with likely exposure to feral swine. Measures have been taken to contain and isolate any risks, with the incident only involving a small number of animals. Hog futures bulls are skittish. Still, this should bring the full supply and demand fundamental picture back into trade, with traders eyeing better substitution demand for pork as cattle prices remain historically elevated.
A smaller U.S. breeding herd and waning slaughter levels into the second and third quarters of this year should provide a floor under cash hog and lean hog futures prices.
On the export front, 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. Hog traders will closely monitor this week’s summit meeting between President Donald Trump and China President Xi Jinping. The two will meet in China, with talks starting Thursday.
Tell me what you think. I enjoy hearing from my valued Barchart readers from all around the globe. Email me at jim@jimwyckoff.com.
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. For more information please view the Barchart Disclosure Policy here.
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