December Lean Hogs continued lower on Friday, opening lower and falling to the low of the day by 9AM CDT. It consolidated near the low the rest of the session. The high was at 74.875, the low at 72.025 and settlement was near the low at 72.175. The pressure continued after Thursday’s limit down session as worries about expanding supply and weakening demand made its way through the market, in my opinion. Slaughter numbers are expected to increase, along with hog weights and cutouts seems to have peaked early in the week, indicating supplies are more than enough to satisfy demand. It has to be frustrating for producers as demand for US pork on the global market remains relatively strong, as supported by a solid export sales report on Thursday, but there are concerns domestic demand is slowing as the summer grilling season winds down. This week’s year-over-year reduction in the slaughter total marked just the 3rd time in the past 15 weeks to record an annual decrease. We need to see this continue to show supplies are decreasing and not building. This could change the psychology in the market but must come with an increase in cutouts and then cash. At least cash seems to have stabilized as the index has found some support above 86.00. A failure below the low could lead to a test of the 71.85 support level. Support then comes in at 71.325. Continued pressure could lead to a test of support at 69.90. If Hogs can hold settlement, we could test the 72.80 resistance level. Resistance then comes in at 74.25.
The Pork Cutout Index increased and is at 95.59 as of 9/07/2023.
The Lean Hog Index increased and is at 86.19 as of 9/06/2023.
Estimated Slaughter for Friday is 478,000, which is above last week’s 476,000 and last year’s 473,000. Saturday’s slaughter is expected to be 121,000, which is below last week’s 150,000 and last year’s 142,000. The estimated slaughter for the week (so far) is 2,537,000, which is above last week’s 2,531,000 and below last year’s 2,555,000.
November Feeder Cattle is now the lead contract as its volume has exceeded the volume of the October contract. This puts price near the all-time highs for the lead contract. Friday’s range was 263.775 high, 262.275 low and settlement was 262.70. Price was higher on the day, but it basically consolidated Thursday’s decline. November actually traded to a new low for the week but recovered and settled within Thursday’s range. Traders covered shorts, in my opinion, in front of the Cattle on Feed report that was released after the close of trading. A failure from settlement could see a test of support at 262.075. Support then comes in at the rising 8-DMA, now at 261.05. A rally past the high could see resistance tested at 264.675. Resistance then comes in at 268.25.
The Feeder Cattle Index decreased and is at 253.22 as of 9/21/2023.
December Live Cattle reversed course and erased Thursday’s decline, in front of the Cattle on Feed report. It made the low at the open (189.80) and rallied to the high by noon CDT at 191.65. It drifted into the close and settled near the high at 191.35. The cash market essentially traded steady with last week and slaughter numbers continue to be light as packers try to goose cutout prices higher. They didn’t have too much success with cutouts as it neared the 300.00 level early in the week, making a low at 301.26 on Wednesday. Cutouts moved higher and ended the week on some strength, but packers are expending a lot of energy trying to keep cash prices reasonable and cutouts from falling below the 300.00 level. Slaughter was reduced again this week and cash trade remains light. Weights are moving higher, which helps both producer and packer in my opinion. Producer could grade better and make more per head as packers get more product with lower slaughter levels. A rally past the Friday high could see price test resistance at the all-time high at 192.05. Resistance then comes in at 195.025. A breakdown from settlement could see the Friday low revisited. Support is nearby at the rising 8-DMA, now at 189.325 and then the rising 13-DMA, now at 187.125.
Boxed beef cutouts were higher as choice cutouts increased 1.40 to 303.33 and select increased 1.43 to 280.43. The choice/ select spread narrowed and is at 22.90 and the load count was 98.
Friday’s estimated slaughter is 114,000, which is below last week’s 121,000 and last year’s 126,000. Saturday slaughter is expected to be 13,000, which is above last week’s 9,000 and below last year’s 34,000. The estimated total for the week (so far) is 625,000, which is below last week’s 632,000 and last year’s 671,000.
The USDA report LM_Ct131 states: Thus far for Friday in Southern Plains negotiated cash trade has been inactive on light demand. The most recent reported market was Thursday with live FOB purchases at 183.00. In Nebraska negotiated cash trade has been slow on light demand the most recent reported market was Thursday with live FOB purchases from 184.00-185.00, with dressed delivered purchases at 292.00. In the Western Cornbelt negotiated cash trade has been slow on light to moderate demand. The most recent reported market was Thursday with live FOB purchases from 185.00-186.00, with dressed delivered purchases traded at 292.00.
The USDA is indicating cash trades for live cattle from 182.00 – 187.00 and from 285.00 – 293.00 on a dressed basis (so far).
United States Cattle on Feed Down 2 Percent
Cattle and calves on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 11.1 million head on September 1, 2023. The inventory was 2 percent below September 1, 2022.
Placements in feedlots during August totaled 2.00 million head, 5 percent below 2022. Net placements were 1.95 million head. During August, placements of cattle and calves weighing less than 600 pounds were 420,000 head, 600-699 pounds were 305,000 head, 700-799 pounds were 455,000 head, 800-899 pounds were 488,000 head, 900-999 pounds were 245,000 head, and 1,000 pounds and greater were 90,000 head.
Marketings of fed cattle during August totaled 1.88 million head, 6 percent below 2022.
Other disappearance totaled 55,000 head during August, 4 percent above 2022.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays (except holiday weeks) and our next webinar will be on Thursday, September 28, 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.
**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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