Hogs and Cattle Struggle as they End Week Lower

Ben DiCostanzoGeneral Commentary

June Lean Hogs opened unchanged at 99.925, which also was the high of the day as price broke down to a new low for the down move at 98.825. Hogs tried to bounce back after making the low but failed to overtake the high and crept lower into the close to settle at 98.95. The cash market has faltered recently after making index highs in the cutout in Mid-April at 101.37 and in the cash index at 91.64 on April 23rd. This is a time when the indices should be climbing. The stall in the cash markets forced traders in my opinion to take the premium of futures to cash down to more realistic levels. The cash markets still have the seasonality to rise into summer but futures traders will probably wait for the buildup before pushing futures to higher premiums to cash in my opinion. A failure from settlement could see price move lower and test support at 98.475. Support then comes in at the rising 50-DMA now at 97.70. If price can hold settlement, we could test resistance at 100.075.

The Pork Cutout Index ticked higher and is at 98.31 as of 05/02/2024.

The Lean Hog Index increased and is at 90.92 as of 05/01/2024.

Estimated Slaughter for Friday is 468,000, which is above last week’s 439,000 and last year’s 455,383. Saturday slaughter is expected to be 19,000, which is above last week’s 4,000 and below last year’s 134,547. The estimated total for the week (so far) is 2,401,000, which is above last week’s 2,379,000 and below last year’s 2,452,109.

August Feeder Cattle opened unchanged, and in a quiet uninspiring session traded to the high at 255.85 and then to the low at 253.75 and the drifted to settle in the middle of the range at 254.75. The price action took price below support at the rising 13-DMA now at 254.375 and the key level just below it at 254.30. The positive for the session was it settled above these levels. The negative for the session was that it traded below the Thursday low and settled below it. If price can hold settlement and take out the Friday high it could test resistance at the declining 8-DMA now at 256.65. Resistance then comes in at 257.925. If futures fail from the Friday low, we could test support at 252.35.

The Feeder Cattle Index decreased and is at 242.39 as of 05/02/2024.

June Live Cattle opened higher, traded to the high of the day at 177.60 and then broke down to the low at 175.925. It recovered, trading back to the high and then faltered into the close to settle at 176.675. The June contract was the weakest cattle contract as the deferred contracts settled in positive territory unlike the June contract. The weakness in June surprises me as the cash markets have recovered after breaking down to its recent low 2 weeks ago. The average price should be higher again this week but futures are behaving as if cash is falling. The recent panic in the futures market continues to linger even as the USDA has come out and shown beef products have tested negatively for the BIAV. The new challenge it seems for futures traders is the stable cutouts and the carcass weights. Carcass weights remain higher than last year as cheap feed, excellent weather and packer desire for heavier cattle has pumped up the volume. The question traders keep answering in a negative way is – Are feedlots current? Futures traders with the continued softness in futures are answering that feedlots aren’t current, in my opinion. With the BIAV out of the way for now, producers were looking for futures to rally but for futures traders the weight gains are getting in the way. Cutouts aren’t rising as the seasonality dictates so there must be demand issues for beef and too much product out there. I mean grocers should be paying up for product, right. Well maybe not. Maybe it is the packers turn to live through non-rising cutouts and higher cattle prices. Demand for beef may not be surging but I believe consumers are still buying beef products in sufficient quantities. In my opinion, packers don’t pay more than they have too. They have to pay more for cattle right now because well, maybe there isn’t enough cattle out there for them to buy and they are desperate for weights to rise to keep production near last year’s levels. Packers don’t pay more than they have too. The load counts for the most part have been in good shape. Maybe cutouts will start to climb as we continue into May. I think packers will continue to pursue cattle at higher prices because they have too. They seem to have finally lost control of both ends of their market. Grocers and producers for now have them on the run. I think that could continue going forward. The low challenged support at 175.95. It held. If price can hold settlement, it could test resistance at 178.10. If settlement fails it could retest support. Support then comes in at the 21-DMA now at 175.325.

Boxed beef cutouts were mixed as choice cutouts increased 1.30 to 294.20 and select decreased 0.33 to 287.65. The choice/ select spread widened and is at 6.55 and the load count was 97.

Friday’s estimated slaughter is 119,000, which is above last week’s 113,000 and last year’s 117,037. Saturday slaughter is expected to be 20,000, which is above last week’s 12,000 and last year’s 10,162. The estimated slaughter for the week is 619,000, which is above last week’s 613,000 and below last year’s 620,888.

The USDA report LM_Ct131 states: Thus far for Friday in the Texas Panhandle negotiated cash trade has been slow on light demand. In Kansas negotiated cash trade has been moderate on trade and demand. Compared to last week in the Southern Plains live FOB purchases traded 2.00 higher at 184.00. In Nebraska and the Western Cornbelt negotiated cash has been slow on light demand. The most recent live FOB purchases in Nebraska were Thursday from 186.00-187.00 and dressed delivered purchases traded 295.00. In the Western Cornbelt on Thursday live FOB purchases traded at 187.00 and dressed delivered purchases traded at 295.00.

The USDA is indicating cash trades for live cattle from 182.00 – 188.00 and from 292.00 – 296.00 on a dressed basis (so far).

For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, May 07, 2024, 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.

Direct: 312.957.4163


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