Written Commentary
CATTLE
The lower close for June cattle after reaching a new contract high on the opening might be considered a bearish technical development. This is the third key reversal since March 18th as the market faces a very strong beef market and buyers have been active on corrective breaks. August cattle also experienced a key reversal. April cattle closed sharply higher and appears to be chasing the cash market higher. The market is technically overbought and holding a premium to the cash market. Continued strong gains in the beef market suggest that cash cattle will continue to advance. The USDA boxed beef cutout was up $3.45 at mid-session yesterday and closed $4.19 higher at $270.50. This was up from $249.97 the previous week and was the highest the cutout had been since June 4. Cash live cattle continued their higher trend on Thursday, trading towards the upper end of Wednesday’s range on lighter volume.
Average dressed steer weights for the week ending March 27 came in at 899 pounds, down from 901 the previous week and but up from 891 a year ago. The 5-year average weekly weight for that week is 875.4 pounds. Actual beef production for the same week came in at 536.2 million pounds, down 5.1% from a year ago. This is a supportive force. There are some concerns that drought conditions could spark more non-fed slaughter in some areas. Yesterday’s drought monitor map showed expansion and increased drought severity over the Dakotas, as precipitation deficits and increased evaporation dried out soils and stressed vegetation. In North Dakota, county extension agents report that producers are starting to destock livestock herds by culling cows. The USDA estimated cattle slaughter came in at 119,000 head yesterday. This brings the total for the week so far to 464,000 head, down from 471,000 last week but up from 411,000 a year ago.
LEAN HOGS
The market remains in a solid uptrend and there is no technical sign of a short-term peak. However, exports are not as strong as expected but the slaughter has come in below expectations for March and early April. June and July hogs traded moderately higher on the session yesterday and into new contract highs. While China’s pig heard may not have expanded as much as expected, we continue to believe that the expansion is impressive, and that exports will drop off for the second half of the year. US pork export sales for the week ending April 1 came in at 33,360 tonnes, down from 61,009 the previous week. The average of the previous four weeks is 42,955. Cumulative sales for 2021 have reached 873,867 tonnes, up from 852,440 last year at this time and the highest on record. The five-year average is 572,752 tonnes. The largest buyer this week was Mexico at 23,031 tonnes, followed by Japan at 3,388, Australia at 1,589, and China at 1,240. Mexico has made the most purchases so far for 2021 at 265,043 tonnes, followed closely by China at 244,077.
Pork exports for February reached 591.9 million pounds, down 10% from last year and down sharply from the peak in March of last year at 701.6 million pounds. Exports represented 26.1% of total production for the month of February. China imported 138.3 million pounds as compared with 253.3 million as the monthly record from May, 2020. The CME Lean Hog Index as of April 6 was 100.47 up from 100.34 the previous session and up from 98.50 the previous week. The USDA pork cutout, released after the close yesterday, came in at $109.16, down 18 cents from Wednesday but up from $107.56 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 1.793 million head, down from 1.956 million last week and down from 1.899 million a year ago. Actual US pork production for the week ending March 27 came in at 552.8 million pounds, up from 549 the previous week but down 7.4% from a year ago.
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