Price action: April lean hog futures rose $1.25 to $105.40, the highest settlement for a nearby contract since prices topped $110.00 in August.
Fundamental analysis: Ongoing wholesale and cash market gains continued to power gains in hog futures. After jumping $1.33 today, the preliminary figure for next the CME lean hog index is up another $1.51, to $93.35, the highest since early October. While pork cutout values ended lower yesterday following a morning jump, the average was up $3.33 early today to $108.08.
This week’s hog slaughter total is running far ahead of the comparable year-ago figure early this week, with the three-day total reaching 1.426 million head, up 11% compared to the same period in 2021. However, this big disparity reflects the arctic weather that hit the U.S. in mid-February last year. Still, slaughter numbers provide little reason to think current hog supplies are diverging significantly from the 6.0% winter reduction indicated by the latest USDA Hogs and Pigs report last December. On the other hand, early-March totals may start indicating smaller year-to-year declines, since the report implied spring hog supplies would run “only” 4% under comparable 2021 levels. And while current cash hog and futures values look high for this time of year, the CME index peaked at $122.68 last June. A 4.0% annual reduction in spring supplies would certainly suggest prices could go even higher by late spring.
Technical analysis: Bull retain a short-term advantage, with the larger chart pattern suggesting another strong bullish advance is forthcoming. However, April futures posted a low-range close today, suggesting bulls may be losing upward momentum. The quick reversal from today’s high at $106.525 placed resistance at that level, as well as the Feb. 10 contract high at $107.70. A breakout above that level would have bulls targeting $110.00.
Initial support persists at the 10-day moving average at $102.56 and is backed by yesterday’s low at $102.075, Monday’s bottom at $101.00 and the psychologically important $100.00 level. A drop below the latter would have bears targeting January lows around $94.00.
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