October Lean Hogs gap opened higher on Tuesday and rallied to the session high at 84.725. The rally stalled and broke down the rest of the session, closing the opening gap and making the low at the end of the day. The low came in at 83.05 and settlement was at 83.175. The rally stalled below resistance at 85.325 and the low and settlement took out support at 83.325. The rally and ensuing break down, created a shooting Star Candlestick pattern. This is a potentially bearish pattern if we see follow through to the downside on Wednesday. Taking out the Tuesday high negates the pattern. The cash market continues to sink but futures traders are attempting to predict a turnaround in the cash market with its recent rally. The futures contract and the Lean Hog Index has converged, nearly eliminating the huge discount of futures to cash as futures are moving higher and the index is falling apart. If this continues, futures and the index could be near parity soon. On the other hand… The daily cutout report showed cutouts surging on a renewed strength in the Belly. If cutouts decline has stalled, maybe we could see a resurgence in the cash market as packers may be more aggressive in purchasing hogs for slaughter. With weights showing a huge decline last week, they may need more pigs to kill if the weights delay its seasonal gains. We’ll see…. If Hogs can recover and rally past resistance at 83.325, it could re-test resistance at the Tuesday high. Resistance then comes in at 85.325. A failure from settlement could lead to a test of the 81.70 support level. Support then comes in at the 21-DMA now at 81.125.
The Pork Cutout Index ticked higher and is at 93.33 as of 9/01/2023.
The Lean Hog Index decreased and is at 87.77 as of 8/31/2023.
Estimated Slaughter for Tuesday is 482,000, which is above last week’s 476,000 and below last year’s 487,000. The estimated slaughter for the week (so far) is 484,000, which is below last week’s 952,000 and last year’s 489,000.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays (except holiday weeks) and our next webinar will be on Thursday, September 07, 2023, 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
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