For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, December 17, 2024, at 3:15 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.
February Lean Hogs opened higher and then traded to the session low at 83.925. A strong morning cutout put bulls back in the driver’s seat as price raced to the high at 86.25. Uncertainty returned and price consolidated the rest of the session to settle at 85.60. Continued lower than expected slaughter numbers has helped provide support to the cash markets, in my opinion as the decline in the indices has stalled and they have started to rebound, ending the week higher and likely to start the week on a stronger than anticipated footing. Weights are consistent and consumer demand must also be better as export sales have been inconsistent as we near the end of the year. Maybe retailers are expecting better sales for the holidays as beef prices remain extremely high even though demand for beef looks like it is in great shape. Also , the lower slaughter numbers could be indicating the USDA was off in its analysis of the hog supply and we are seeing a shortage of hogs as we end the year. We get the next Hogs and Pigs report on December 23rd, and it will be interesting to what revisions the USDA makes to the heavier weight classes. Will they finally get one right as they seem to be off more often then not with their estimates? Could the drop in slaughter persist into the new year? A continued drop-off on the slaughter numbers could jump-start Hogs into January, keeping the heavy long positions in control for a while longer. We’ll see!… If price breaks down from settlement, it could re-test support at 85.325. Support then comes in at the rising 21-DMA now at 85.275 and then 83.325. If price can get above the flattening 13-DMA, now at 86.50, it could re-test resistance at 87.10 and then the 200-DMA, now at 87.375. Resistance then comes in at 88.325.
The Pork Cutout Index increased and is at 92.66 as of 12/12/2024.
The Lean Hog Index increased and is at 83.92 as of 12/11/2024.
Estimated Slaughter for Friday is 474,000, which is below last week’s 480,000 and last year’s 476,054. Saturday slaughter is expected to be 163,000, which is below last week’s 185,000 and last year’s 302,252. The estimated total for the week (so far) is 2,573,000, which is below last week’s 2,602,000 and last year’s 2,694,652.
January Feeder Cattle had a rough day, opening lower, rallying to the high of the day at 259.025 and then breaking down to the low at 256.35. A strong Live Cattle market helped lift Feeders off the ground, but it couldn’t come all the way back, settling lower on the day at 257.65. I think the early failure was due to the USDA announcing they are letting Mexican Cattle come back into the US as the protocols are in place to examine the for screwworm and they are good to go. In good old USDA fashion, they walked back their announcement that Mexican cattle could start entering the US before the end of the year and holiday season. They will now resume shipments incrementally after the start of the new year, with “full resumption of live animal movement after that.” The USDA also said they approved more funding to block the pest from getting into the US aiding in the production and dispersal of sterile screwworm flies in Central America. Panama has increased production of the sterile flies to approximately 95 million sterile flies from 20 million over the past year. The USDA said it eradicated the screwworm from the US with this technique. The early rally failed at trendline resistance at 258.925 and it closed below the key levels at 259.925. The breakdown and ensuing rally left a long shadow on the candlestick, and it formed a Doji, indicating indecision. We’ll see!… If price holds settlement, it could test resistance at the Trendline. Resistance then comes in at 261.05. A breakdown from settlement could see a re-test of support at the nearby at the short-term moving averages. The 13-DMA is at 257.60 and the 8-DMA is at 257.00.
The Feeder Cattle Index decreased and is at 262.59 as of 12/12/2024.
February Live Cattle started the day lower, attempting to follow through to the downside after Thursday’s reversal down move. It couldn’t sustain the downward pressure, making the low mid-morning at 190.375 and then reversing higher as the morning cutout was a little higher with a strong load count, giving bulls a boost that the cash market could continue to firm into next week. The cutout improved some more in the afternoon report which could provide more confidence that the cash market will continue to strengthen next week. The Primal Rib continues to astound as it has now reached 653.24 when seasonally it usually begins to fall back. Packers need cattle to provide enough product and could keep slaughter from breaking down next week as it has done in the past. Slaughter numbers are already in the tank, declining again this week to 609,000 which is causing heads to be scratched as with slaughter numbers lowering each week, why are the packers so aggressive in paying up for cattle? The choice/ select spread remains wide as consumers go all out in their desire to eat beef, preferring the more expensive cuts, which is amazing. It seems the pandemic created beef connoisseurs’, as the American consumer has not let go of their desire to eat choice cuts. With the heavier weights you might think there would be enough to go around but, I am told you don’t get that many more ribs from heavier cattle. Just more thickness. The turnaround in price continued till the end of the session, making the high at the end of the day at 192.25 and settling at a new all-time high for the lead contract at 192.025. This is a tick off the old all-time high at 192.025. Amazing! Cash could remain strong next week as there is belief the packer is still short on supply and with the upcoming week the last full week of slaughter, they will have to step up their game. They also have truncated weeks coming up with Christmas and New Years occurring on a Wednesday which may force more buying activity from the packer. Maybe we won’t have a major profit-taking move from the longs as we near the end of the year. The only thing standing in the way of continued strength could be the Cattle on Feed report which comes out on Friday, and it comes out after the close. Estimates are likely to come out on Tuesday or Wednesday and depending on the numbers, could stall the rally. If price can’t hold settlement, it could consolidate withing Friday’s range. If settlement holds, we could see price test resistance at the new all-time high at 192.70. Resistance then comes in at 193.50.
Boxed beef cutouts were higher as choice cutouts increased 1.15 to 316.39 and select jumped 3.38 to 283.86. The choice/ select spread narrowed and is 32.53 and the load count was 123.
Friday’s estimated slaughter is 115,000, which is below last week’s 117,000 and last year’s 120,900. Saturday slaughter is expected to be 5,000, which is below last week’s 12,000 and last year’s 23,089. The estimated total for the week(so far) is 609,000, which is below last week’s 614,000 and last year’s 647,172.
The USDA report LM_Ct131 states: So far for Friday in the Southern Plains negotiated cash trading has been inactive on very light demand. In the Texas Panhandle, thus far for the week live FOB purchases have traded from 191.00 -192.00, with a light test noted. In Kansas, the last reported market was on Tuesday with live FOB purchases at 191.00. In Nebraska negotiated cash trading has been limited with light demand. In the Western Cornbelt negotiated cash trading has been inactive on very light demand. In these two regions, Thursday was the last reported live FOB and dressed delivered purchase market from 195.00-196.00 and at 305, respectively.
The USDA is indicating cash trades for live cattle from 186.00 – 196.00 and from 295.00 – 312.00 on a dressed basis (so far).
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Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
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