February Lean Hogs opened lower and traded down to the session low at 71.275. This was just below support at 71.325. Support held and price recovered, rallying to the high at 72.60. The high was right at strong resistance denoted by the 100-DMA now at 72.60. It was also below resistance at 72.80. This proved to be too much for the market to bear and price broke down and settled in the middle of the range at 71.90. Severe weather has limited hog slaughter this week(see below) and it hasn’t caused a surge in cutouts or the cash market. Cutouts are higher but not jumping out and getting aggressively bid. Neither has cash. Seasonals indicate a rally into February, but so far, the cash markets haven’t been enjoying much success, even though it has stabilized and is off the low. Many expect cash to rally, that is likely why futures have rebounded and is trading at a premium to cash. The slow slaughter pace has kept cash markets in check and futures aren’t breaking out above resistance. This is a negative for the market in my opinion and the Doji candlestick established on Friday with three days before the next open doesn’t invite confidence in the market’s rally potential, in my opinion. The good news is the market is now consolidating in the upper end of its recent trading range and is right at resistance. If it can hold settlement(settlement was above the upper end of the 71.325 – 71.85 band) we could revisit the Friday high. A breakout above resistance at 72.80 could see price test resistance at 74.25. Resistance then comes in at 75.60. The bad news is that we had a Tweezer Top formation with two sessions at the same high (73.05). This is in my opinion bearish for price. If futures break down below the Friday low, it could test support at the 50-DMA now at 70.30. Support then comes in at 69.90 and the rising 21-DMA now at 69.925.
The Pork Cutout Index ticked higher and is at 84.93 as of 01/11/2024.
The Lean Hog Index increased and is at 66.77 as of 01/10/2024.
Estimated Slaughter for Friday is 332,000, which is below last week’s 489,000 and last year’s 475,000. Saturday slaughter is expected to be 149,000, which is below last week’s 430,000 and last year’s 289,000. The estimated total for the week (so far) is 2,279,000, which is below last week’s 2,371,000 and last year’s 2,689,000.
March Feeder Cattle opened lower and traded to the low of the day 225.675. The low was right at support at 225.675 and the market rejected the low and surged. It traded up to the session high at 229.60 where it was also rejected and fell back to settle at 227.70. The rally burst through resistance at 228.05 but couldn’t overtake the 229.825 resistance level. The breakout couldn’t hold and the price action just in my opinion expanded the trading range it is in. The good news for that is it expanded to the upside and not the downside. The range is now 229.60 to the low at 222.10 with an upward lean, now that we are in the upper end of the range. If price can retake resistance 228.05, we could revisit the Friday high and resistance at 229.825. If resistance is taken out, we could test the 231.175 resistance level. If price falls below support at 226.925 it could revisit the Friday low. Support then comes in at 224.475.
The Feeder Cattle Index increased and is at 228.00 as of 01/11/2024.
February Live Cattle opened unchanged and worked its way to the low at 171.05 by mid-morning. The low tested support at the 8-DMA now at 171.10. Price was able to hold support and it rallied to the session high at 172.60 just past noon. The rally took price past the declining 50-DMA now at 172.225 stalling just below resistance at 172.75. The rally was soundly rejected, and price fell back towards the low to settle near the low at 171.375. The cash market was noticeably quiet with cash prices trading from 172.00 – 173.00 on a live basis and 272.00 – 275.00 on a dressed basis on Friday. The weather being the culprit as slaughter levels are in holiday mode and the hopeful big Saturday slaughter doesn’t look like it will happen as packers list only 20,000 for Saturday. This put packer needs at bay and caused cutouts to jump with no help to producer prices. Weather is expected to remain bad into next week so lackluster trading could continue when the Futures market resumes trading on Tuesday due to the Monday holiday. A breakdown below the 8-DMA could see price test support at 170.375. The rising 21-DMA is next at 169.95 and support then comes in at 168.625. If settlement holds, we could retest resistance at the declining 50-DMA and then 172.75. Resistance then comes in at 174.25.
Boxed beef cutouts were higher as choice cutouts jumped 3.37 to 289.26 and select increased 1.91 to 271.85. The choice/ select spread widened and is at 17.41 and the load count was 126.
Friday’s estimated slaughter is 105,000, which is below last week’s 124,000 and last year’s 126,000. Saturday’s slaughter is expected to be 20,000, which is below last week’s 47,000 and last year’s 32,000. The estimated total for the week (so far) is 549,000, which is below last week’s 551,000 and last year’s 661,000.
The USDA report LM_Ct131 states: So far for Friday in the Southern Plains negotiated cash trading has been limited with light demand. A few live FOB purchases have traded at 172.00, however, not enough for a full market trend. Last week in the Southern Plains live FOB purchases traded from 172.00-173.00. In Nebraska negotiated cash trade has been slow with light demand. Thus far for the week live FOB purchases traded steady to 2.00 lower at 173.00 and dressed delivered purchases traded 0.50-2.00 lower from 272.00 -275.00. In the Western Cornbelt negotiated cash trade has been mostly inactive with light demand. Not enough purchases for a market trend. Thursday was the fully reported market with live FOB purchases at 175.00 and dressed delivered purchases 275.00, a light test of dressed purchases was noted.
The USDA is indicating cash trades for live cattle from 170.00 – 175.00 and from 272.00 – 275.00 on a dressed basis (so far).
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, January 16, 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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