Written Commentary
CATTLE
April cattle closed 55 points higher on the session Friday and experienced the highest close since February 25th. The market gained 170 points for the week. June cattle pushed up to the highest level since March 18. The short-term demand outlook remains very strong and with the rally in beef prices, cash markets look higher again this week. The USDA boxed beef cutout was up $1.95 at mid-session Friday and closed $1.21 higher at $237.66. This was up from $229.99 the previous week and was the highest the cutout had been since March 1. Cash live cattle traded in light volume on Friday at $116-117, about $1-2 higher than the previous week. The 5-day, 5-area weighted average as of Friday was $115.49, up from $114.21 the previous week. The USDA estimated cattle slaughter came in at 115,000 head Friday and 56,000 head for Saturday.
This brought the total for last week to 646,000 head, up from 627,000 the previous week but down 5.7% from a year ago. Beef production for the week was down 5.4% from last year. Friday’s Commitments of Traders report showed managed money traders were net sellers of 4,005 contracts of live cattle for the week ending March 23, reducing their net long to 79,555. Non-commercial, no CIT traders were net sellers of 6,740 contracts for just one week, reducing their net long to 53,313. Non-commercial & non-reportable traders were net sellers of 6,114, reducing their net long to 83,507.
LEAN HOGS
April hogs gaped higher and posted new contract highs for the fourth session in a row on Friday, and for the 8th of the last 9 trading sessions. The market closed up 650 points (6.9%) for the week. The market is extremely overbought technically but open interest also remains in a steady uptrend as fund traders build a net long position. June hogs also traded sharply higher on the day. The USDA hogs and pigs report showed that hog supply is down about 2% from trade expectations and this supported the strong gains. The supply was below the low end expectation which helped to drive the market higher. The CME Lean Hog Index as of March 24th was 94.59 up from 93.85 the previous session and up from 91.24 the previous week. This leaves April hogs holding a large premium to the cash market. The USDA pork cutout, released after the close Friday, came in at $106.45, down from $108.03 on Thursday but up from $101.82 the previous week. The USDA estimated hog slaughter came in at 487,000 head Friday and 142,000 head for Saturday.
This brought the total for last week to 2.551 million head, up from 2.524 million the previous week but down 8.2% from a year ago. Pork production for the week was down 7.2% from a year ago. Friday’s Commitments of Traders report showed managed money traders were net buyers of 262 contracts of lean hogs for the week ending March 23, increasing their net long to 76,095. Non-commercial & non-reportable traders were net sellers of 361 contracts, reducing their net long to 83,149. China’s national average spot pig price as of March 29 was down 2% from the previous day. For the month, prices are down 7.1% and down 27.5% year to date. If there was a serious supply issue due to another wave of AFS in China, pig prices would likely be higher; not lower.
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