October Lean Hogs opened higher, rallied to the high of the session at 79.75, drifted and then broke down from mid-morning to the end of the day to the low at 78.275. It settled near the low at 78.45. The opening rally stalled just below resistance at 79.80 and with a confluence of moving average resistance in the area, proved to be too much for traders hoping to take price higher. The 8 and the 21-DMAs are at 79.55 and 79.50 with the 50-DMA just above at 79.95. With cash markets continuing to weaken, futures face a tough period if cash doesn’t reverse, in my opinion. Cutouts came in lower on the morning report as traders were hoping for cutouts to move higher and then the end of the session cutout confirmed the weakness. This will keep pressure on the in indices. The weakening cash comes as demand for pork is holding up reasonably well, but slaughter is exceptionally high. Hog supply is seasonally large and with weights running higher is keeping slaughter and production at elevated levels, which in my opinion will keep price on the defensive in the cash and futures. Hogs are at the lower end of its recent trading range, forming a ledge which could lead to a breakdown if price starts the week lower. The range is from the September 10th low at 78.20 to the September 12th high at 80.15. We’ll see!… If price breaks down from the low, it could test support at 77.80 and then move towards support at 76.175. If price holds settlement, we could test resistance at 78.80. Resistance then comes in at 79.80 and then the declining 80.45.
The Pork Cutout Index ticked lower and is at 96.43 as of 09/12/2024.
The Lean Hog Index ticked lower and is at 85.35 as of 09/11/2024.
Estimated Slaughter for Friday is 480,000, which is below last week’s 482,000 and above last year’s 476,522. Saturday slaughter is expected to be 155,000, which is below last week’s 395,000 and above last year’s 150,652. The estimated slaughter for the week (so far) is 2,571,000, which is above last week’s 2,327,000 and last year’s 2,535,467.
October Feeder Cattle opened higher, rallied to a new high for the recent up move at 241.375, reversed course and broke down to the low of the day at 238.30. It then consolidated the rest of the session, settling at 239.125. The rally tested resistance at 240.875 and the breakdown tested support at 238.35. The cash index has been choppy with yesterday seeing it drop a little over at buck and today seeing it jump 2 bucks. The Cattle on Feed report comes out next Friday and could provide negative sentiment as expectations are already coming out showing an on-feed number 1% above last year. The market could get volatile as the cash index is trying to firm and the report could negate any positive sentiment that results from a potentially rising index. If the index remains choppy like this week, any negative sentiment about the report could send price lower, creating negative sentiment for the feeder cash market. We’ll see!… If price holds settlement, we could re-test resistance at 240.875. Resistance then comes in at the flattening 242.475. A breakdown from settlement could see a re-test of support at 238.35. Support then comes in at 237.25.
The Feeder Cattle Index increased and is at 243.32 as of 09/12/2024.
October Live Cattle opened a tick lower and rallied to the session high at 178.90. It broke down from the high, trading to the low at 177.00. It consolidated and settled at 177.65. The rally stalled just under the 200-DMA now at 179.075 and the low was just under the 8-DMA now at 177.175. The cash market couldn’t generate any strong upside this week, making a new low for the recent slide at 177.00 as packers able to pressure cash prices, taking them below 180.00 and backing off after buying for their needs. On a positive note, for producers, we did see cash trade at its high for the week on Friday, but I don’t think that will sway sentiment towards producers. Packers also slaughtered 620,000 head this week, the most for the summer, so that is another positive, but that means packers are making money and are able to get their needs met without bidding up for cattle, in my opinion. Cutouts fell on Friday, and this could lead to packers backing off some more and with the Cattle on Feed report coming up, could lead to some negative sentiment in the futures markets. If price can’t hold settlement, it could re-test support at 175.95. Support then comes in at 174.425. If settlement holds, we could see price test resistance at 178.10. Resistance then comes in the 200-DMA and then 179.40.
Boxed beef cutouts were lower as choice cutouts dropped 2.27 to 304.91 and select decreased 1.47 to 294.17. The choice/ select spread narrowed and is at 10.74 and the load count was 158.
Friday’s estimated slaughter is 118,000, which is below last week’s 123,000 and last year’s 121,084. Saturday slaughter is expected to be 17,000, which is below last week’s 43,000 and above last year’s 8,976. The estimated total for the week (so far) is 620,000, which is above last week’s 542,000 and below last year’s 631,200.
The USDA report LM_Ct131 states: Thus far for Friday, trade was limited on light to moderate demand in the Southern Plains, however not enough purchases for an adequate market test. The latest established market in the Southern Plains was on Wednesday with live purchases at 181.00 in the Texas Panhandle and from 180.00- 181.00 in Kansas. Trade was light on moderate demand in Nebraska and the Western Cornbelt on Friday. In Nebraska thus far for the week, live purchases have traded mostly steady from 181.00- 182.00. Dressed purchases for the week have traded steady to 6.00 higher ranging from 288.00- 294.00 on a light test. In the Western Cornbelt thus far for the week, live purchases have traded steady to 2.00 higher from 182.00-183.00 with dressed purchases 2.00-6.00 higher ranging from 288.00-294.00 on a light test.
The USDA is indicating cash trades for live cattle from 177.00 – 184.00 and from 287.00 – 294.00 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 17, 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.
Direct: 312.957.4163
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