GENERAL COMMENTS:
June lean hog futures closed at a new one-year high Wednesday as demand for cash hogs continues to outweigh Friday's bearish concerns about a higher-than-expected inventory. June live cattle and May feeders both posted lower closes after volatile trading sessions.
LIVE CATTLE:
June live cattle closed down $0.77 at $175.60 Wednesday, succumbing to another day of selling after an Ohio dairy that received cattle from Texas reported cattle testing positive for highly pathogenic avian influenza (HPAI). To repeat, the nation's milk and beef supplies are safe and officials are trying to learn more about how to contain the flu. Wednesday's trading volume was low, but volatile as prices finished $1.85 above their low for the day. Friday's CFTC report showed specs net long 66,910 contracts as of March 26, the most likely source of selling this week. With bearish influence from the futures market, it is reasonable to expect lower cash prices again this week, but so far, cash trade has been quiet as cattle numbers are limited and producers don't seem as eager to sell as specs are. Last week's weighted average of $299.49 for negotiated dressed cattle was down from the record high of $302.09 the previous week.
Not surprising, retail demand is showing some softness this week. Wednesday's choice boxed beef price ended at $301.30, down $2.86 on the day. Selects ended at $296.92, down $2.07 with a total load count of 151. Cattle slaughter has also slowed lately, totaling just 586,000 last week.
USDA estimated Wednesday's slaughter at 123,000, down from 124,000 the previous week. Even though March 1 on-feed supplies were up 1.3% from a year ago, everyone knows the available supply of cattle remains limited and U.S. employment remains high, two keys for a market with good fundamental support.
THURSDAY'S CATTLE CALL: Steady with another disappointing report of beef export sales expected Thursday morning.
FEEDER CATTLE:
May feeder cattle closed down $2.27 at $242.57 Wednesday, a volatile day that saw prices rebound from trading down over $4.00 earlier in the session. Unfortunately, concerns about HPAI make good fodder for emotional swings in the market, but we have yet to see evidence of a legitimate threat to the safety of the nation's beef supply. That is not to say conditions couldn't change as vets and health officials are still assessing the situation, but for now, the problem of HPAI infections looks manageable.
As of Monday, the CME Feeder Index was at $248.27, down $3.33 from a week ago, but $7.32 above Wednesday's close in the April futures contract. Technically speaking, May feeder prices are wrestling with the 100-day average near $244.00 and Friday's close will offer a good tip of future direction.
LEAN HOGS:
After trading higher all day, June lean hogs closed up $1.02 at $104.75 Wednesday, the highest close in over a year. It was the third higher close since receiving Friday's bearish news from USDA that the hog inventory was higher-than-expected and suggests market demand is the stronger factor.
Proving that out, negotiated national cash hog prices ended at $86.04 Wednesday, up over $40 since December and at its highest prices since August. USDA's swine formula price ended at $84.72, near its highest price since September. The premium of the negotiated price over formula is a bullish sign of packer demand the market hasn't seen since July of 2023.
Wednesday afternoon's cutouts ended down $2.30 at $94.83, still up over a dollar since last Friday. Ribs were down $4.32 and loins were down $4.12. Cutouts remain well above cash hog prices, a good situation for packers still benefiting from active retail demand. The new twist is that since 2024 began, cash hog prices are also climbing.
USDA estimated 491,000 hogs were slaughtered Wednesday, up from 490,000 a week ago. Year-to-date hog slaughter is up just 0.2% from a year ago. The CME Hog Index was projected at $85.15 as of Tuesday, up 90 cents on the week but $2.82 below Wednesday's April close.
THURSDAY'S HOG CALL: Steady in June hogs with traders possibly leery about prices near new one-year highs.
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