December Lean Hogs opened unchanged, rallied to the high of the session at 74.65, and then broke down to the low at 74.025. It settled near the low at 74.225. The high of the day is also a new high for the up move and the candle formed a spinning top, indicating indecision after achieving the new high. The cash market has stabilized, is in a range for both cutouts and the lean hog index, which to me means supply and demand have equalized. Customers are liking the prices they are paying and are able to move product through exports and the consumer in sufficient amounts. The rally took price past resistance at 74.25 and resistance is holding with settlement just below resistance. Hogs also has the potential to form an evening star candle formation if the trade breaks down on Monday. This is a potentially bearish formation and could lead to a pullback in hogs. If price breaks down from the low, it could test support at the 200-DMA now at 73.725 and then move towards support at 72.80. If price holds settlement, we could re-test the Friday high. A rally past the high would negate the potential evening star formation and lead price higher. Hogs would face resistance at 75.60 and then 76.175.
The Pork Cutout Index ticked higher and is at 94.46 as of 09/19/2024.
The Lean Hog Index ticked higher and is at 84.38 as of 09/18/2024.
Estimated Slaughter for Friday is 475,000, which is above last week’s 475,000 and below last year’s 475,625. Saturday slaughter is expected to be 140,000, which is below last week’s 1555,000 and above last year’s 122,033. The estimated slaughter for the week (so far) is 2,506,000, which is below last week’s 2,565,000 and last year’s 2,546,648.
October Feeder Cattle opened lower, broke down to the low of the day at 242.025, reversed course and rallied to the high of the day at 245.30. It broke down from the high to settle at 243.90. The rally tested a confluence of resistance at the declining 50-DMA now at 244.70, the rising 200-DMA now at 245.65 and the key level at 245.75. It was able to squeak by the 50-DMA but was unable to reach the other two levels. With the Cattle on feed looming traders pulled back on the trade and it settled with a spinning top candle formation, indicating indecision in the market. The two-day trade is 2/3rds of an evening star candle formation, which as described before is potentially bearish. It needs a breakdown on Monday to complete the formation. The cash index has been choppy and has been in a range from 239.53 to 244.42 through the month of September. Futures, during this time, has rallied from a low at 229.575 to the Friday high. This has brought the futures from an extreme discount to slightly premium to the index. If price holds settlement, we could re-test resistance. Resistance then comes in at 248.875. A breakdown from settlement could see a test of support at 242.475. Support then comes in at 240.875.
The Feeder Cattle Index decreased and is at 243.26 as of 09/19/2024.
December Live Cattle opened lower and broke down to the low at 180.00. It reversed course and rallied to the high at 183.45. It drifted and settled near the high at 183.20. Cash market strength took prices higher as packers paid higher prices on Friday to get cattle bought in front of the cattle on feed report. Packers were desperate to buy cattle and bought cattle at even higher prices that won’t reach the mandated negotiated price by buying cattle on the grid. This gave producers better potential for price and kept the cash average from leap-frogging higher. The cattle on feed report came out after the close on Friday and the results are below. I believe the report was neutral as it was in line with estimates. Cutouts were positive to end the week, but it was still over 4 bucks below last week’s Friday number. This keeps pressure on the packer, and they will continue to limit slaughter in response and are able to do so as weights continue to soar, keeping production at high levels, even with the lower slaughter. The rally took price past resistance at 182.575, with a solid close above it. The helps keep bulls in control and the Friday high was a new high for the recent up move. When looking at the December chart, the rally stopped at the 200-DMA now at 183.425. This hurdle must be overcome if futures are to move higher. Just below was the 100-DMA, which is at 183.025. Strong resistance indeed. If price can’t hold settlement, it could test support at 182.575. Support then comes in at 181.175. If settlement holds, we could see price test resistance at 184.35. Resistance then comes in the 185.75.
Boxed beef cutouts were higher as choice cutouts increased 0.63 to 300.19 and select increased 0.33 to 288.59. The choice/ select spread widened and is at 11.60 and the load count was 130.
Friday’s estimated slaughter is 108,000, which is below last week’s 118,000 and last year’s 113,386. Saturday slaughter is expected to be 9,000, which is below last week’s 17,000 and last year’s 12,841. The estimated total for the week (so far) is 610,000, which is below last week’s 620,000 and last year’s 626,639.
The USDA report LM_Ct131 states: Thus far for Friday in the Texas Panhandle negotiated cash trade has been slow on light demand. Compared to last week live FOB purchases traded 2.00 higher at 183.00. In Kansas negotiated cash trade and demand has been moderate. Compared to last week live FOB purchases traded 2.00-3.00 higher at 183.00. In Nebraska negotiated cash trade and demand has been moderate. Compared to last week live FOB purchases traded 2.00-3.00 higher at 184.00. Compared to last week dressed delivered purchases traded 2.00 higher from 290.00-292.00. In the Western Cornbelt negotiated cash trade and demand has been moderate. Compared to last week live FOB purchases traded 1.00 -2.00 higher from 184.00-185.00. Not enough dressed for a market trend. Last week dressed delivered purchases traded from 288.00-294.00.
The USDA is indicating cash trades for live cattle from 177.00 – 185.50 and from 288.00 – 292.50 on a dressed basis (so far).
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, September 24, 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.
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