Demand Forces Positive For Cattle
The market remains in a solid uptrend and demand forces remain very positive. The USDA boxed beef cutout was up $3.30 at mid-session yesterday and closed $4.10 higher at $262.77. This was up from $244.83 the previous week and the highest the cutout had been since June 4. Cash live cattle continues to trend higher. In Kansas, 1,187 head traded at $121.00, up from $116.00-$118.00 last week. June cattle traded moderately higher on the session yesterday and posted contract highs for the third session in a row. April cattle closed sharply higher on the session and the buying pushed the market up to the highest level since late February.
With cash trading up this week, and a positive demand tone short-term, April cattle can also remain in a positive trend. Ideas that the cash market will trade higher again this week has helped support as the strong gains in the beef market in the past week is a positive factor for cash markets. The USDA estimated cattle slaughter came in at 120,000 head yesterday. This brings the total for the week so far to 225,000 head, down from 239,000 last week but up from 212,000 a year ago.
June hogs experienced follow through selling from Monday’s key reversal, but experienced a strong rally off of the lows to close slightly lower on the day. Solid gains in cattle futures helped to support. Fears that African swine fever is spreading in China, and that this will significantly lower their production and support even stronger imports has helped provide support. Once again, China is aggressively importing feedgrains, and pig prices in China continue to drift lower, and both of these factors would suggest that China production is still expanding at a strong pace. China’s national average spot pig price as of April 07 was down 2.63% from the previous day. For the week prices are down 6.47%, down 8.45% for the month and down 35.14% year to date.
The market remains in an overbought technical condition with significant RSI divergence on the last several moves to contract highs. This points to a loss in upside momentum. Stochastic crossover is a bearish technical signal and the premium of futures to the cash market may also be a limiting factor. The CME Lean Hog Index as of April 2 was 100.10 up from 99.38 the previous session and up from 97.38 the previous week. The USDA pork cutout, released after the close yesterday, came in at $107.57, down 44 cents from Monday but up from $105.30 the previous week. The USDA estimated hog slaughter came in at 492,000 head yesterday. This brings the total for the week so far to 817,000 head, down from 973,000 last week and 958,000 a year ago.
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