December Lean Hogs opened lower and made the low at 71.15. This tested support at 71.325. Support held and the market was bid up the rest of the session and made the high late at 73.675. Settlement was near the high at 73.575. Traders continued to cut back on the huge discount the December futures have to the cash index. I think the strong export sales on Thursday gave some pause to the negative demand and growing supply seasonality thoughts. If exports, which are very important to the hog complex, in my opinion, continue to perform well, this could push the cash market higher, contrary to previous expectations for the fall season. Traders are also hopeful that retailers will continue to feature pork, which already is much cheaper than beef to keep consumers going to the meat counter. I think there is also the perception we may have seen peak slaughter levels and it will level off going forward. With some products in possible short supply (hams) and the holiday season nearing, will retailers be more aggressive in purchasing product to get this seasonal necessity? We’ll see… The rally took price past resistance at 72.80, putting resistance at 74.25 in traders’ crosshairs. A pullback from settlement has support at 71.85 and then 71.325. Support then comes in at 69.90.
The Pork Cutout Index decreased and is at 95.43 as of 10/05/2023.
The Lean Hog Index decreased and is at 83.70 as of 10/04/2023.
Estimated Slaughter for Friday is 476,000, which is above last week’s 473,000 and below last year’s 477,000. Saturday’s slaughter is expected to be 153,000, which is below last week’s 203,000 and last year’s 160,000. The estimated slaughter for the week (so far) is 2,564,000, which is below last week’s 2,599,000 and last year’s 2,568,000.
November Feeder Cattle opened lower and raced down to the low of the day at 248.225. This is a new low for the recent down move and it tested support at 248.85 and was able to bounce strongly off the low. The market rallied the rest of the day to the high at 251.25. This put price back into the upper end of its prior two-day trading range and a retest of resistance at 251.30. The rally stalled just below resistance and it settled at 250.875, keeping the bears in control of the price action, in my opinion. Friday’s recovery does give some hope to bulls as it formed a hammer candlestick indicating a potential reversal in sentiment, in my opinion. The price action has to continue moving higher, take out resistance at 251. 30 and then 252.35 to confirm this in my opinion. A rally past resistance could see price test resistance at 254.30. A failure from settlement could see price revisit support. Support then comes in at the rising 100-DMA, now at 247.25.
The Feeder Cattle Index decreased and is at 250.41 as of 10/05/2023.
December Live Cattle opened lower and traded and traded to the low at 184.70. It turned higher and rallied the rest of the session to the high at 187.00. The rally took price past resistance at 185.75 and formed a Bullish Engulfing candlestick. This could reignite sentiment as engulfing candlesticks, especially after the market makes a low is usually good for bulls. Packers were able to knock cash a little lower this week as futures broke down to Thursdays low at 184.60, forcing producers to acquiesce to packers demands. Cash however, has been in a trading range and producers have been faring reasonably well during this time. They want to keep cattle moving as packers continue to keep slaughter levels below last year’s levels. Packers have been (admittingly) in a tough spot. Cash prices have been high and cutouts after a brief rally have fallen and hovers around to 300.00 mark. This has not been good for packers. They have been able to cut back slaughter numbers, but have not been able to get cutout prices to surge. Retailers have been able to keep cutouts at levels they are comfortable with and keep prices at somewhat reasonable levels in their store. This could help and keep product moving, especially in these uncertain times going forward. A rally past the Friday high could see price test resistance at the declining 13-DMA, now at 188.575. Resistance then comes in at 190.075. A breakdown from settlement could see support revisited at 185.75. Support then comes in at 184.35.
Boxed beef cutouts were higher as choice cutouts surged 4.25 to 302.01 and select increased 1.01 to 275.78. The choice/ select spread widened and is at 26.23 and the load count was 97.
Friday’s estimated slaughter is 112,000, which is above last week’s 96,000 and below last year’s 119,000. Saturday slaughter is expected to be 17,000, which is above last week’s 11,000 and below last year’s 37,000. The estimated total for the week (so far) is 628,000, which is above last week’s 612,000 and below last year’s 669,000.
The USDA report LM_Ct131 states: Thus far for Friday in the Southern Plains negotiated cash trading has been at a standstill. In the Texas Panhandle the last reported market was on Wednesday with live FOB purchases at 182.00. In Kansas the last reported market was on Tuesday with live FOB purchases at 182.00. In Nebraska and Western Cornbelt negotiated cash trading has been limited on light demand. In Nebraska, a few live FOB purchases traded at 184.00. However, not enough live or dressed purchases for a full market trend in either region. In Nebraska the last reported live FOB purchase market was on Thursday at 183.00. The last reported dressed delivered purchase market was on Wednesday from 288.00-290.00. In the Western Cornbelt the last reported market was Thursday with live FOB purchases from 183.00-184.00 and dressed delivered purchases, on a light test, at 290.00.
The USDA is indicating cash trades for live cattle from 181.00 – 185.00 and from 287.00 – 294.75 on a dressed basis (so far).
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be on Tuesday, October 10, 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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