October Lean Hogs opened lower and ticked to the high at 82.825. Price fell from here, racing to the low at 80.95. Trade was done by 9:15, consolidating the rest of the session and settling at 81.525. Traders continue to worry about the inconsistency in the cash market, in my opinion, as cutouts and cash trading have weakened but are not down for the count. Traders worry about increasing seasonal supply even as weights sag below last year and the 5-year average and the inability to sustain prices. Export sales came out on Friday, and they were down for last week as Mexico was lower and China was a no show. The USDA showed – Net sales of 26,300 MT for 2023 were down 29 percent from the previous week and 13 percent from the prior 4-week average. Increases were primarily for Mexico (8,500 MT, including decreases of 200 MT), Japan (4,700 MT, including decreases of 200 MT), South Korea (3,300 MT, including decreases of 200 MT), Colombia (2,200 MT, including decreases of 100 MT), and Nicaragua (1,700 MT). Total net sales of 3,100 MT for 2024 were for South Korea. Exports of 30,500 MT were down 2 percent from the previous week, but up 9 percent from the prior 4-week average. The destinations were primarily to Mexico (13,600 MT), China (3,900 MT), Japan (3,600 MT), Canada (2,500 MT), and South Korea (2,000 MT). This keeps worries about demand in front of traders as exports are important to the hog market, in my opinion. The low was just above support at the declining 21-DMA, now at 81.90. It was good to see it hold back the decline but, settlement was below support at 81.70 so this keeps the pressure on the bulls. A failure below the low could lead to a test of the 80.45 support level. Support then comes in at 79.80. If Hogs can retake the 81.70 (it is now) resistance level, it could re-test resistance at the 8-DMA now at 82.475. Resistance then comes in at 83.325.
The Pork Cutout Index increased and is at 95.59 as of 9/07/2023.
The Lean Hog Index increased and is at 86.19 as of 9/06/2023.
Estimated Slaughter for Friday is 474,000, which is above last week’s 466,000 and below last year’s 481,000. Saturday’s slaughter is expected to be 348,000, which is above last week’s 21,000 and last year’s 320,000. The estimated slaughter for the week (so far) is 2,234,000, which is below last week’s 2,381,000 and last year’s 2,252,000.
October Feeder Cattle grinded to a new all-time high for the lead contract at 259.65. It was also its all-time settlement high at 259.15. The session low was at 258.425. It was the narrowest range for the past 7-sessions and a Spinning Top candlestick formation indicating indecision at the all-time high. This could lead to some expanded range next week either up or down as traders either try to take price above 260.00 psychological resistance (round number) or profit taking on missing taking profits at the all-time high. We’ll see…. A failure from settlement could see a test of support at 257.925. A rally past the high has pivot resistance at 259.90, 260.39 and then 261.13 on the daily and 260.725 on the monthly, with the weekly at 261.76.
The Feeder Cattle Index decreased and is at 249.21 as of 9/07/2023.
October Live Cattle consolidated within Thursday’s trading range, making the high at 183.80 and the low at 182.75. Settlement was at 183.225. It was a tough day for the fats after Thursday’s take out of the August 4th high at 183.725. It made the high at 184.525 and then pulled back to settle below the 184.35 resistance level. With October now trading above the Southern Region’s cash prices as they traded cash from 179.00 – 180.00 this week, I think we need to see upticks in the cash price, or we could see a pullback in futures. There has been a tendency for futures to trade near the lowest cash prices, in my opinion, and with the Northern region steady to lower, narrowing the wide spread between the 2 major regions, packers seem to be succeeding in breaking down producers resolve and lowering cash prices. Export Sales were once again lousy, in my opinion as the USDA report showed – Net sales of 11,900 MT for 2023 were down 34 percent from the previous week and 20 percent from the prior 4-week average. Increases were primarily for Japan (4,100 MT, including decreases of 400 MT), South Korea (2,100 MT, including decreases of 400 MT), China (1,600 MT, including decreases of 100 MT), Mexico (1,400 MT, including decreases of 100 MT), and Hong Kong (700 MT, including decreases of 200 MT). Net sales of 200 MT for 2024 were reported for Hong Kong (100 MT) and Taiwan (100 MT). Exports of 14,600 MT were down 27 percent from the previous week and 8 percent from the prior 4-week average. The destinations were primarily to South Korea (3,600 MT), Japan (3,200 MT), China (2,200 MT), Mexico (1,900 MT), and Canada (1,000 MT). A rally past the Friday high could see price revisit resistance at 184.35. Resistance then comes in at the all-time high for the lead contract at 185.75. A breakdown from the low could see support tested at 182.575 and then 181.175.
Boxed beef cutouts were mixed as choice cutouts increased 1.24 to 312.90 and select decreased 0.19 to 286.05. The choice/ select spread widened and is at 26.85 and the load count was 107.
Friday’s estimated slaughter is 125,000, which is above last week’s 122,000 and below last year’s 128,000. Saturday slaughter is expected to be 51,000, which is above last week’s 8,000 and below last year’s 89,000. The estimated total for the week (so far) is 559,000, which is below last week’s 629,000 and last year’s 606,000.
The USDA report LM_Ct131 states: Thus far for Friday in Texas Panhandle negotiated cash trade has been slow on light to moderate demand. Compared to last week live FOB purchases traded 1.00 higher at 180.00. In Kansas negotiated cash trade has been slow on light to moderate demand. Compared to last week live FOB purchases traded 2.00 higher at 180.00. In Nebraska negotiated cash trade has been limited on light demand. However not enough purchases for a market trend. The last established dressed delivered purchase market was on Thursday at 290.00 on a light test. The latest established live FOB market was last week at 182.00. In the Western Cornbelt negotiated cash trade has been limited on light demand. However not enough purchases for a market trend. The latest established live FOB market was Thursday from 183.00-184.00. Last week dressed delivered purchases traded at 290.00 on a light test.
The USDA is indicating cash trades for live cattle from 179.00 – 185.00 and from 286.00 – 294.00 on a dressed basis (so far).
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 14, 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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