April Lean Hogs opened lower and down ticked to the low at 82.15. It raced higher, made the session high at 84.00 and consolidated the rest of the session in the upper end of the range, settling at 83.25. The cash market continues to work higher with cutouts leading the way, giving bulls hope that demand is improving as it is believed grocers are keeping pork at attractive prices to move pork as beef prices continue to be high. Export sales are respectable and hope is as China reduces its herd, they will come here to buy pork. The weather-related slowdown in slaughter seemed to get cutouts out of its decline and now you may have retailers more aggressive as they missed the lows and seasonals usually lead to strength going into February. Slaughter must come down in my opinion as this week’s slaughter was monstruous in my opinion. This could have been some catch up from the weather-related reduction from a couple weeks ago. The impressive feat is even with slaughter moving higher into this week cash and cutouts moved higher. This needs to continue and don’t forget, Easter comes early this year and there is great expectation that hams will lead cash higher. We’ll see…. The rally took price past resistance at 83.325but in the end it couldn’t settle above resistance. If price can’t hold settlement, we could see a pullback to support at 81.70. Support then comes in at 79.40. A new high puts traders’ sites on resistance at 85.325, in my opinion. Resistance then comes in at 87.10.
The Pork Cutout Index ticked higher and is at 88.84 as of 01/25/2024.
The Lean Hog Index increased and is at 69.67 as of 01/24/2024.
Estimated Slaughter for Friday is 490,000, which is above last week’s 477,000 and below last year’s 490,869. Saturday slaughter is expected to be 294,000, which is below last week’s 348,000 and above last year’s 92,802. The estimated total for the week (so far) is 2,719,000, which is above last week’s 2,630,000 and last year’s 2,546,000.
March Feeder Cattle opened lower, made the low at 237.575 and then surged. It raced to the high at 241.65 by late morning and then pulled back into the close to settle at 239.70. The low tested support at the rising 200-DMA now at 237.80 and the ensuing rally took price past resistance at 238.35 and then 240.875. The rally wasn’t able to be sustained above the higher resistance level, settling below it. Cash prices are rising for both the fats and the feeder class and futures are now trading at a premium to the index, indicating that traders envision higher cash going forward. Remember, if futures keep on building the premium, we could get a snapback towards the cash index. But, right now the outlook is positive for price. If futures can hold settlement, we could revisit resistance and then the Friday high. A surge past the high could set price on a path towards resistance at the gap from 242.375 to 242.675on the continuous chart, with long-term resistance at 242.475. Resistance then comes in at the 61.8% retracement level at 243.475 (the all-time high at 264.675 to the 209.15 low). A failure from settlement could see support revisited at the rising 200-DMA.
The Feeder Cattle Index increased and is at 232.06 as of 01/25/2024.
April Live Cattle opened lower at the session low at 180.30. It worked higher, making a new high for the up move at 182.15. It pulled back, consolidating in the upper end of the range, settling at 181.675. The rally took price past resistance at the 61.8% retracement level at 180.725 and then 181.175 with settlement above resistance. The high however, couldn’t challenge resistance at 182.575, falling short of it. Packers took price up to 178.00 on a live basis to get cattle bought in the early going and then cash drifted with price trading from 174.00 – to 177.50. The South was at the lower end and the North at the upper end of the range. The cash average should jump and producers are hoping for price to continue higher into next week. Cattle are under-performing, which is creating a supply problem, in my opinion as the weight loss in cattle has tightened market ready supply. Packers didn’t go all out on slaughter this week, hoping to see a jump in cutouts, which did move higher this week. If futures can hold settlement, it could test resistance at 182.575. Resistance then comes in at the gap from 183.275 to 183.525 on the continuous chart. If futures pullback from the 61.8% retracement level, it could test support at 179.40. Support then comes in at the 100-DMA now at 178.275 and the nearby 178.10 support level.
Boxed beef cutouts were higher as choice cutouts increased 1.85 to 300.53 and select increased 1.28 to 289.13. The choice/ select spread widened and is at 11.40 and the load count was 76.
Friday’s estimated slaughter is 121,000, which is even with last week and below last year’s 122,462. Saturday slaughter is expected to be 5,000, which is below last week’s 34,000 and last year’s 31,175. The estimated total for the week (so far) is 618,000, which is above last week’s 617,000 and below last year’s 653,208.
The USDA report LM_Ct131 states: Thus far for Friday in the Texas Panhandle negotiated cash trade has been at a standstill. The most recent live FOB purchases was Thursday at 175.00. In Kansas negotiated cash trade has been mostly inactive on light demand. The most recent live FOB purchases was Thursday from 174.00- 175.00, mostly at 175.00. In Nebraska negotiated cash has been slow on light demand. The most recent live FOB purchases was Thursday from 175.00-177.00 and dressed delivered at 277.00. In the Western Cornbelt negotiated cash has been slow on light demand. The most recent live FOB purchases was Thursday from 174.00-177.00 and dressed delivered purchases traded at 277.00.
The USDA is indicating cash trades for live cattle from 173.00.00 – 178.00 and from 274.00 – 278.00 on a dressed basis (so far).
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, January 30, 2024, at 3:00 pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon completion of the webinar.
**Call me for a free consultation for a marketing plan regarding your livestock needs.**
Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
Direct: 312.957.4163
888.391.7894
Fax: 312.256.0109
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
tested support at the
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall not be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.