Technically Speaking

June Lean Hogs Approach Old Highs

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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June lean hogs have come a long way from the coronavirus-related low near $40 in April 2020 and are now trading near their highest prices in over six years, supported by strong retail pork demand, lighter inventories and renewed talk of African swine fever in China. (DTN ProphetX chart)

Lean Hogs:

June lean hogs closed up $1.25 per hundredweight last week to $95.42, close to their highest June prices in over six years. The $100 mark in June hogs was first reached in July 2008, and except for a brief breach in 2014, has largely provided a strong wall of resistance. The $100 mark also contained June lean hog prices in 2019 when hopes ran high that African swine fever in China would be bullish for U.S. hog prices. According to USDA, Dec. 1 hog inventory was down 1% from a year ago and the inventory may be even lighter with reports of Porcine Reproductive and Respiratory Syndrome (PRRS) causing problems around the Midwest. Meanwhile, pork cutout values have risen above $95.00, signaling strong retail demand and there is renewed talk of African swine fever making the rounds in China. June hog prices appear to be setting up for another challenge of the $100 market in the first half of 2021.

Live Cattle:

June live cattle finished down $0.42 last week, ending at $118.00. Friday's close was down from its February high of $122.40 but is still near its highest June prices in three years as cattle futures slowly emerge from last year's coronavirus-related lows and try to convince cash prices to join them. Standing in the way of higher cattle prices are the highest cattle-on-feed numbers in over 10 years. Choice boxed beef prices were down $9.20 last week, but packer incentive is still high to keep slaughter going. The most important resistance for June cattle moving forward is the 2017 high near $134.00. In the meantime, June live cattle are trending gradually higher with support at $114.00, the site of the 100-day average.

Feeder Cattle:

May feeder cattle took a dip last week, but ended up $0.07 at $145.15, successfully holding above support at $141.00 where the 100-day average comes into play. Despite rising corn costs, May feeder cattle have been able to hold roughly steady since November with help from vaccine distributions and bullish optimism for the economy in general. The 2017 high near $158.00 represents formidable resistance should prices eventually break out of their current slump. For now, May prices are largely chopping sideways, helped by good beef demand, while traders remain cautious about expensive corn prices.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of livestock and livestock futures involve substantial risk and are not suitable for everyone.

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