Basis for cattle could change from June discount to June premium to cash

The technical chart pattern is quite bearish, but the live cattle market is likely to find at least a short-term bottom soon. It seems to have the supply fundamentals for the cash market to rise this month, and the supply fundamentals suggest that June Cattle should trade at a higher-than-normal premium to the cash market rather than the current steep discount. The jump in beef prices may be enough for the market to hit a bottom.

The USDA boxed beef cut was up $5.78 mid-session yesterday and closed $3.49 higher at $271.53. This was up from $264.50 the previous week and was the highest cut since February 14. Live Cattle Cash trading has been slightly lower in active trading the first two days of this week. The average price for five areas on Monday was 138.48 with 21,027 head reported. The average was 138.74 on Tuesday with 16,947 traded. Both are down from 139.22 last week.

June cattle closed sharply lower yesterday after a higher open failed to attract new buying interest. Technical action remains weak, but the fundamental outlook for this quarter has improved from the previous quarter.

Beef production is expected to decline from the first quarter to the second quarter by almost 170 million pounds compared to a normal increase of 200 million to 400 million pounds. Beef prices are trading higher for the week and spot markets appear to have stabilized. Additionally, June cattle are trading at a discount on the cash market compared to a normal premium of $8.47 for this time of year.

The slaughter of cattle estimated by the USDA reached 125,000 heads yesterday. This brings the total for the week so far to 246,000 head, up from 244,000 last week and 225,000 a year ago. Bird flu problems affecting eggs and poultry could support better demand for beef. For now, however, the loss in exports is almost equal to the loss in production.

Livestock market ideas

The market appears to have supply fundamentals to rally in the near term, and June Cattle may go from a discount to a premium in the cash market. June cattle support is at 133.07 and 132.40, with resistance at 137.15 and 138.62. August support for cattle is at 134.47, with 138.30 as resistance.

lean pigs

Pork values ​​decline lower, June still higher than normal premium.

The lean hog market remains under the negative technical influence of last week’s key reversal. Weakness in the pork market plus continued weakness in cattle are seen as negative forces. The sharp four-day sell-off leaves the market in a short-term oversold condition. The USDA pork cut, released after the close yesterday, came in at $102.16, down $2.02 from Monday and down from $102.22 a week earlier. June hogs closed sharply lower yesterday after a bullish push failed to attract fresh buying interest. During the session, the market fell to its lowest level since March 8. June hogs are still trading at a hefty premium in the cash market, so the upside may be somewhat limited.

The CME Lean Hog ​​Index as of April 1 was $102.41, down from $102.63 in the previous session and $102.93 in the previous week. This leaves June Hogs trading at a premium of $11.94 in the cash market compared to a five-year average premium of $8.12. Talk of lower poultry production and higher egg prices may have provided some support, but so far, the loss of poultry exports has been the trade-off. The hog slaughter estimated by the USDA reached 480,000 heads yesterday. This brings the total for the week so far to 957,000 head, up from 955,000 last week and 815,000 a year ago.

Market ideas for pigs

Traders see the market as a bit oversold after the sharp sell off from Thursday’s high. Resistance for June Hogs is at 117.97 and 119.75, with 111.92 and 109.15 as support. August Hog resistance is at 115.87, with 108.90 as support.

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About the Author: Terry Roggensack, founding editor of The Hightower Report, analyzes the markets for livestock, grain, and soft commodities. Roggensack has more than 30 years of experience in the financial futures and commodities industry. In the late 1980s, he briefly lived in London as acting director of a new London clearing company. Before that, Roggensack was director of research at Stotler & Company.

editor’s note: This report includes information from sources believed to be reliable and accurate as of the date of this publication, but independent verification has not been performed and we do not guarantee its accuracy or completeness. The opinions expressed are subject to change without notice. Any information or recommendation contained in this document: (i) is not based on, or tailored to, commodity interest or cash market positions or other circumstances or characterizations of particular investors or traders; (ii) is not customized or customized for any investor or trader; and (iii) does not take into consideration, among other things, risk tolerance, net worth or available risk capital. Any use of or reliance on the information or recommendations is at the sole discretion and choice of the subscriber. The risk of loss in trading commodity futures or options contracts can be substantial, and traders should carefully consider the risks inherent in such trading in light of their financial situation. Any reproduction or retransmission of this report without the express written consent of The Hightower Report is strictly prohibited.

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