December Lean Hogs opened higher, made the made the high of the day at 73.625 and traded lower the rest of the session to the low at 71.525. It settled near the low at 71.75. The initial upticks in price took it to the 61.8% retracement of the September 20th high at 78.70 to the October 20th low at 65.40. The retracement level just happens to be the high of the day and the week at 73.625. It couldn’t handle the heat and pressed lower, retracing around half of Thursday’s rally and breaching support at the 50% retracement (72.05) and then the 71.85 support level. It settled below them and came close to the 71.325 support level. Cash markets continued to reflect seasonal weakness as slaughter levels are well above last year indicating supplies are more than enough, even with good demand from exports and US consumers. Traders are hoping that cash is going to turn around as we get closer to Thanksgiving as grocers start featuring hams and turkey. Demand for hams is expected (“hoped”) to be strong and supply is tight. This could force grocers to bid up hams and packers to get aggressive for hogs. We’ll see… A breakdown from the low could see price test support at 70.475 which is the 38.2% retracement level. Support then comes in at 6990. A rally past the 50% retracement level could see a test of resistance at 72.80 and the 61.8% retracement level.
The Pork Cutout Index increased and is at 86.88 as of 11/02/2023.
The Lean Hog Index down ticked and is at 76.84 as of 11/01/2023.
Estimated Slaughter for Friday is 486,000, which is above last week’s 482,000 and last year’s 465,000. Saturday slaughter is expected to be 260,000, which is above last week’s 191,000 and last year’s 165,000. The estimated slaughter for the week (so far) is 2,677,000, which is above last week’s 2,614,000 and last year’s 2,575,000.
January Feeder Cattle opened higher and made the high nearby at 242.375. It traded down to the low of the day at 239.425 and then consolidated near the low and settled at 239.75. The high took a little more off the top as it closed a bit of the gap from the October 20th low at 242.65 to the October 23rd high at 242.325. Price pulled back as the index is drifting and corn had a nice rally on Friday putting some pressure on futures. The breakdown tested support at the declining 13-DMA now at 239.30. It couldn’t breach it so that is a positive. A failure to hold settlement could see price test support at 238.85. Support then comes in at 237.25. If price can hold settlement, we could re-test the key level at 240.875 and then the Friday high.
The Feeder Cattle Index decreased and is at 237.62 as of 11/02/2023.
December Live Cattle opened higher and made the high just above it at 184.975. It broke down to the low of the day at 183.525, consolidated and settled near the low at 183.875. The trade higher off the open stalled below the rising 50-DMA now at 185.10 and the breakdown took price below support at 184.35 and the flattening 21-DMA now at 184.075. The price action formed a Bearish Engulfing candlestick just a day after closing the gap from the October 2oth low at 184.425 and the October 23rd high at 183.65. This is a double whammy as the market tends to trade in the direction of the gap after closing it. The cash market struggled to gain any traction as packers were hoping for a weak Friday in the futures market, looking for producers to capitulate and drop prices towards their bids. Not much trading occurred before the futures close and trade will either take place after the close or wait until next week as producers and packers stare down and wait for the other to blink. Cutouts are weakening furthering packers’ plight. Producers don’t care as they remember what occurred the past few years as packers kept the clamps on them and reaped large profits at the expense of everyone else. A failure from the low could see price test support at 182.575. Support then comes in at the rising 100-DMA now at 181.55. Support then comes in at 179.40. If futures can hold settlement, a test of the 184.35 resistance level is possible. A push through the gap and the rising 50-DMA could see the Bearish Engulfing candle erased leading to a test of resistance at 185.75. Resistance then comes in at 187.725. A break out above the gap could be explosive. It will take a lot of energy to penetrate this area, so, if it does look out.
Boxed beef cutouts were lower as choice cutouts fell 2.19to 302.34 and select dropped 2.33 to 272.01. The choice/ select spread widened and is at 30.33 and the load count was 151.
Friday’s estimated slaughter is 122,000, which is above last week’s 118,000 and below last year’s 125,000. Saturday slaughter is expected to be 14,000, which is below last week’s 16,000 and last year’s 29,000. The estimated total for the week (so far) is 632,000, which is below last week’s 636,000 and last year’s 668,000.
The USDA report LM_Ct131 states: So far for Friday in the Southern Plains negotiated cash trading has been mostly inactive on light demand. Not enough purchases for a market trend. Last week live FOB purchases traded at 185.00. In Nebraska and Western Cornbelt negotiated cash trading has been slow on light to moderate demand. In both regions a few live FOB and dressed delivered purchases traded at 185.00 and 292.00, respectively. However, not enough purchases for a full market trend. In Nebraska last week live FOB purchases traded from 183.00-186.00 and dressed delivered purchases traded mostly at 290.00. In the Western Cornbelt last week live FOB purchases traded mostly from 183.00-184.00 and dressed delivered purchases traded at 290.00.
The USDA is indicating cash trades for live cattle from 181.00 – 185.50 and from 290.00 – 292.75 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, November 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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