For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, January 14, 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 unchanged and raced to the session high at 83.00. This took price to just above resistance at the declining 21-DMA now at 82.825 and just below the key level at 83.00. The weight of resistance was too much for the market and it collapsed. It broke down to the low at 81.475 which was just below support at the 13-DMA now at 81.925 and the key level at 81.70. The tide turned and price grinded higher the rest of the session to settle at 82.55. It was a strengthening morning cutout that helped lead the way yet again and this time the cutout didn’t go negative even though it took away almost half of the morning gain in the cutout. The load count was respectable for a Friday, especially after a strong load count for the week, with the prior four days all above 400. These are extremely high load counts in my opinion. Export sales were a respectable 31,000 MT, especially with the strong Dollar and it looks like retailers are preparing for increased pork demand from consumers with the high load counts. You should expect more consumer demand with pork prices well below beef but, will it develop or will retailers raise prices to compensate for keeping beef prices affordable. Slaughter levels are expected to head lower into the remainder of January as the USDA projects lower hog numbers for the month. This could further support cutout prices and eventually turn cash prices higher if it occurs. We’ll see!… If price can’t hold settlement, we could revisit support at 81.70, and the 100-DMA now at 80.825. Support then comes in at 79.80. If price can overtake resistance at 83.325, price could test resistance at the 50-DMA now at 83.65. Resistance then comes in at 85.325.
The Pork Cutout Index increased and is at 89.34 as of 01/09/2025.
The Lean Hog Index decreased and is at 80.59 as of 01/08/2025.
Estimated Slaughter for Friday is 483,000, which is above last week’s 477,000 and last year’s 321,550. Saturday slaughter is expected to be 167,000, which is below last week’s 408,000 and above last year’s 50,235. The estimated total for the week (so far) is 2,551,000, which is above last week’s 2,266,000 and last year’s 2,171,129.
March Feeder Cattle gap opened higher and raced to a new all-time high for the lead contract at 271.00. Price failed at the high and broke down to close the gap established at the open. The WASDE report came out and corn surged which in my opinion led to a crash in the Feeders. It took price down to the low at 266.775 and a test of support at 266.95. This is 1st trading day of the new year high which at the time was a new all-time high. It settled in the upper end of the range at 269.40. The price action formed a Hanging Man candle formation which could indicate a possible top in the market if we get a negative reaction on the open on Monday. However, the past few potential reversals at the prior tops were negated as we climbed the ladder to new highs. The Feeder Index is surging as producers continue to go on a spending spree for feeder weight cattle leading to another new high in the index established after the close at 278.55. This puts March at a steep discount to the cash market and with continued expectations for higher cash prices, we could see buying come into the futures on pullbacks. But markets give way at some point as it is healthy for profit taking to take place after rallies or declines to set up the next move in price. We’ll see!… If price holds settlement, it could test resistance at the all-time high. A breakdown from settlement could see a re-test of support at 266.95.
The Feeder Cattle Index surged and is at 278.55 as of 01/09/2025.
February Live Cattle surged on the open with a gap higher and a trade to another new all-time high for the lead contract at 199.10. The market stalled here as it looks like some trepidation crept into traders’ minds as we got so close to the magical 200.00 level. Price broke down and closed the gap reaching a low at 197.65. A late rally saw price settle at 198.775. This is also a new settlement high for the lead contract. It also formed a Hanging Man candle formation. This is a potential topping formation if we see a breakdown on Monday. The futures market is trading at a discount to the cash market as the North and the South are both trading higher and this could negate any pullbacks in the futures if cash prices stay high. This is possible as cutouts have surged and producers don’t look like they are in a mood to give back any gains especially with the new found highs in the cutout. Prices traded at new all-time highs this week on the mandatory report. It reached as high as 205.00 on live basis and 330.00 on a dressed basis. Producer break evens are rising and they have to hold on to high prices going forward. Everyone wonders when and how the packer will retake control of the cash market and many believe it is inevitable as they cut back hard on slaughter hoping to pressure producers and the retail industry. With the numbers high in the feedlot, many believe the producer is losing its currentness and will lead to an exhaustion in the cash rally. Corn prices took a turn higher on the WASDE report and could pressure feed costs if it breaks out to higher levels. This could lead to a panic sell by producers if their cost becomes prohibitive. This could also back fire on the packer as an unwillingness by the producer to feed cattle to the heavy weights the packer is demanding could lead to an eventual extreme shortage of cattle in the feedlots. That is in my opinion the conundrum the market faces going forward. I believe the packer wants to keep the cattle in the feedlot as long as possible because they need the production and want to eventually break the producer if the numbers get excessive. The problem is with prices so high it is more advantageous to maybe keep the cattle in the feedlot instead of paying higher prices for the feeder cattle to replace what they sold and the packer may know the numbers may not be there to replace all the cattle sold. Especially if weights head lower going forward. We’ll see!… If price can’t hold settlement, it could test the Friday low. Support then comes in at 196.625. If settlement holds, we could see price make new highs and test the February contract high at 199.575 established when February came on board in September of 2023. The psychological 200.00 level is next.
Boxed beef cutouts were higher as choice cutouts increased 2.06 to 332.84 and select surged 5.79 to 314.14. The choice/ select spread narrowed and is 18.70 and the load count was 128.
Friday’s estimated slaughter is 105,000, which is below last week’s 121,000 and above last year’s 104,323. Saturday slaughter is expected to be 10,000, which is below last week’s 35,000 and last year’s 17,208. The estimated total for the week(so far) is 589,000, which is above last week’s 506,000 and last year’s 544,902.
The USDA report LM_Ct131 states: Thus far for Friday in the Southern Plains negotiated cash trading has been light with moderate demand. In the Texas Panhandle, a few live FOB purchases traded from 200.00-201.00. In Kansas, a few live FOB purchases traded at 201.00. However, not enough purchases in either region for a full market trend. Thursday was the last reported market in the Southern Plains with live FOB purchases at 200.00. In Nebraska negotiated cash trading has been light with moderate demand. When compared to the last market on Thursday, live FOB purchases traded steady at 203.00. The last reported dressed delivered market was on Thursday with purchases at 320.00. In the Western Cornbelt negotiated cash trading has been limited on light demand. The last reported market was on Thursday with live FOB purchases from 200.00-205.00 and dressed delivered purchases at 320.00.
The USDA is indicating cash trades for live cattle from 196.00 – 205.00 and from 315.00 – 330.00 on a dressed basis (so far).
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Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
Direct: 312.957.4163
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