February Lean Hogs opened higher and raced higher to the session high at 70.225. The high was in between resistance at the declining 50-DMA (70.125) and 21-DMA (70.275) and just above the 69.90 resistance level. This confluence of resistance was too much for the market to overcome and it proceeded to fall apart, trading lower and breaking to the low at 66.725. The low was just above support at 66.55 and it bounced and settled at 67.325. December futures is expiring on Thursday and February will be both the lead contract based on volume and the spot contract based on closest to expiration. With futures breaking down and the cash market following but still above the February contract, traders are likely believing that the cash market will continue to weaken going into the new year. February usually trades at a premium to the index. The price action formed an outside day down candlestick, also bad news for hogs. Hogs need a reversal quickly on Tuesday or we could see the October 20th low at 65.40 challenged on the continuous chart. There is support at 66.55 and Feb made a low at 65.80 on November 28th. If futures hold settlement, we could see a re-test of resistance at 67.80. Resistance then comes in at 68.75.
The Pork Cutout Index increased and is at 84.24 as of 12/08/2023.
The Lean Hog Index decreased and is at 68.76 as of 12/07/2023.
Estimated Slaughter for Monday is 462,000, which is below last week’s 483,000 and last year’s 489,000. Friday and Saturday slaughter was revised lower to 479,000 and 249,000respectively. The estimated total for the week (so far) is 2,674,000, which is below last week’s 2,695,000 and above last year’s 2,579,000.
January Feeder Cattle opened lower, tried to rally and then broke down to the low of the day at 213.25. It stabilized and then turned north and rallied the rest of the session to the high at 218.30. It settled near the high at 217.95. The breakdown stalled just above support at 213.20 and the subsequent rally took price past resistance at 216.125 and then 217.375. It settled above resistance and puts resistance at 219.40,220.875 and then the declining 21-DMA now at 221.025 in play on a continuation higher. The cash index however, broke down below 220.00 so that could limit upside in my opinion. If futures fall below 217.375, we can see a test of support at 216.125, 215.45, 214,55, 214.15 and then 213.20. Support then comes in at 212.15.
The Feeder Cattle Index fell and is at 218.37 as of 12/08/2023.
February Live Cattle opened lower, also made an early attempt at a rally that failed, breaking down to the low at 164.875. The breakdown took price to a tick below support at 164.90 which saw bulls come in and bid up price and take it higher the rest of the session to the high at 168.15. It settled near the high at 167.90. It was a good way to start the week for bulls, taking price above resistance at 166.975 and the declining 8-DMA now at 167.00. It failed to approach resistance at 168.625 and the declining 13-DMA now at 169.075. These hurdles must be surpassed or we could see futures reverse course and test support at 166.975 and the 164.90. Cash has not trade on Monday as packers stayed away as futures rallied (unlike last week, when they pounced on the weakness in futures. The Show-list is smaller and producers are hoping futures stay strong so they can get some pricing power back. Right now, expectations are for steady prices at best, but if futures stay strong, maybe we can get a bounce in the cash market. We’’ see…
Boxed beef cutouts were higher as choice cutouts jumped 2.42 to 290.43 and select increased 1.64 to 259.54. The choice/ select spread widened and is at 30.89 and the load count was 134.
Monday’s estimated slaughter is 126,000, which is above last weeks and last year’s 125,000.
The USDA report LM_Ct131 states: Thus far for Monday in all trading regions negotiated cash trade has been at a standstill. Last week in the Southern Plains week live FOB purchases traded at 171.00. Last week in Nebraska live FOB purchases traded from 169.00-171.00, dressed delivered purchases from 267.00-272.00. Last week in the Western Cornbelt live FOB purchases traded from 168.00-171.00, with dressed purchases from 268.00-270.00.
The USDA is indicating no cash trades for live cattle and 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, December 12, 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
888.391.7894
Fax: 312.256.0109
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