April lean hogs have been on a run the past few days due to the positive trade talks with China paired with the most recent outbreak of ASF (African Swine Flu) in China which caused demand to increase. The breeding herd in China was down 15% from one year ago. As of Tuesday, China’s cash pig prices were up 11.8% on the day and up a total of 35.2% for the year. USDA pork cutout values, released after the close yesterday, came in at $65.25, up $1.96 from Friday and up from $61.33 the previous week. The USDA estimated hog slaughter came in at 475,000 head yesterday. This was up from 465,000 last week and up from 459,000 a year ago as this time. With fund traders short, it did not take much in the way of positive news on prices in China to support a significant rally. Overall the market is bullish, and it signals a drive up to the $65 level.
In April live cattle, there are still bullish fundamental forces even though it failed to support any of the aggressive sell-off that happened due to the overbought condition and the high open interest in the market yesterday. The sell-off caused the April contract to now start trading at a discount to the cash market even as the supply continues to dip because of the lower weights. USDA boxed beef cutout values were up $1.48 at mid-session yesterday and closed 86 cents higher at $228.22. This was up from $224.04 the previous week, and was the highest the cutout had been since May 30th of last year. Yesterday’s selling pushed the April cattle down to their lowest level since February 15th. The USDA estimated cattle slaughter came in at 120,000 head yesterday. That brings the total for the week so far to 239,000 head, up from 236,000 last week at this time and up from 232,000 a year ago.
Lean Hogs Apr ’19 Daily Chart