January Feeder Cattle is now the lead contract as its volume has exceeded the November contract. It gap opened lower on the continuous chart at the high of the day at 250.325. It broke down and took out the consolidation range low at 248.225 and all he!$ broke loose. Price collapsed and traded down the rest of the session to the low at 244.675. It bounced at the close and settled at 245.375. Settlement was below support at 245.75, keeping the bulls gasping. The break down below the consolidation band caused a panic in bulls and you could feel the get me out at any price pain they had once it broke through support. Not only did it take out the low of the consolidation band, it took out the rising 100-DMA now at 148.775 which was likely expected to stop the decline. Then it was look out below…. This is the lowest the lead contract has been since the end of July. Corn rallied today, rallying past the 5.00 mark and closing strong putting fear that the corn lows could be in and making feed costs start to go higher. Plus, outside market pessimism also was a factor in the selloff, in my opinion. The cash index has been declining and today’s print continued down as feedlots have been backing off on paying up for feeder weight cattle as the fats have been stagnant and higher feeder prices aren’t going to help the bottom line, in my opinion. A breakdown below the Thursday low could see support tested at 242.475. If price can retake 245.75, we could move towards the consolidation band low.
The Feeder Cattle Index fell and is at 244.83 as of 10/19/2023.
December Live Cattle opened lower and traded to the session high at 187.20. It broke down below the low of the ledge at 186.15 and traded to the low at 184.95. The breakdown took price back into the lower end of the larger trading range the December contract has been in. Settlement was at 185.30. I think the losses were spear headed by the crash in the Feeder Cattle, a surge in crude oil and the pessimism over the ongoing Middle East crisis taking away the appetite for risk. The cash market ignored all this as it has been strong compared to last week, though on light volume. We also have the Cattle on feed report out after the close and the estimates are for the on-feed figure to be at 99.8% of last year, placements to be 101.6% and marketings to crater at 90.2%. This likely played a part also. Packers have paid higher prices for cattle this week (so far) even as cutouts remain depressed (relatively speaking) (we are at all-time high cutouts after all). The decline in futures hasn’t done any serious damage to the chart as we are just in the lower end of its trading range. A breakdown below the 184.25 low of the range however, could see a reaction like we had in the Feeder market. Because, just like in Feeders we have long-term moving average support right near the low. This time it is the 50-DMA now at 184.675 and just above the consolidation low. A failure here could see a test of support at 182.575. If futures can get above 185.75, we could revisit the Thursday high.
Boxed beef cutouts were mixed as choice cutouts increased 0.26 to 304.12 and select decreased 0.87 to 277.48. The choice/ select spread widened and is at 26.64 and the load count was 164.
Thursday’s estimated slaughter is 125,000, which is above last week’s 120,000 and below last year’s 130,000. The estimated total for the week (so far) is 502,000, which is above last week’s 499,000 and below last year’s 509,000.
The USDA report LM_Ct131 states: Thus far for Thursday in the Southern Plains negotiated cash trade has been slow on light demand. In Kansas a few live FOB purchases traded at 184.00, however not enough purchases for a market trend. Last week in the Southern Plains live FOB purchases traded at 183.00. In Nebraska negotiated cash trade has been slow on light demand. A few live FOB purchases traded at 186.00 and a few dressed delivered purchases traded at 294.00, however not enough purchases for a market trend. For the prior week In Nebraska live FOB and dressed delivered purchases traded at 185.00 and at 292.00, respectively. In Western Cornbelt negotiated cash trade was slow on light to moderate demand. Compared to last week live cash purchases traded 1.00-2.00 higher from 186.00 -187.00. Compared to last week dressed delivered purchases traded 2.00 higher from 292.00- 294.00, on a light test.
The USDA is indicating cash trades for live cattle from 182.00 – 187.00 and from 291.00 – 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 on Tuesday, October 24, 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.
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Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
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