October Lean Hogs gap opened lower on Monday and made the low of the day at 78.85. The low was just above support at 78.80 and bulls took over and drove price higher. The gap open lower was some follow through selling from the crash in the cutout on Friday. The cutout was lower on the afternoon report and traders sold the open because of this, in my opinion. With cattle steady and belief that cutouts would rebound on Monday; traders went into buy mode. Cutouts were indeed higher on the morning report and Feeders were rallying, lending support to the market. The rally lasted the entire session, making the high at the end of the day at 81.925. Settlement was near the high at 81.85 and it was above resistance at 81.70. Hogs are in a downtrend, and we are entering a bearish seasonal period. The cutout rally was good to see, but it wasn’t anywhere near the breakdown on Friday. Bellies recovered but has a long way to go to catch up to earlier levels. Slaughter should increase from here, which could put pressure on the cutout and cash markets. If Hogs hold settlement, it could test resistance at 83.325. A failure from 81.70, could lead to a re-test of the 80.45 support level. Support then comes in at 78.80.
The Pork Cutout Index fell and is at 101.41 as of 8/25/2023.
The Lean Hog Index decreased and is at 95.18 as of 8/24/2023.
Estimated Slaughter for Monday is 476,000, which is above last week’s 471,000 and below last year’s 482,000. Friday’s slaughter was revised lower to 463,000. The estimated slaughter for the week (so far) is 2,495,000, which is above last week’s 2,414,000 and last year’s 2,412,000.
October Feeder Cattle surged and made a new all-time high for the lead contract. The high came in at 257.925 and settlement was also at a new all-time high at 257.025. The low was at 253.925. The cash market continues to strengthen, and the index made a new high for the year with today’s number. Feedlots have been aggressive in their purchases and aren’t showing any signs of slowing down. The cash market is forcing bulls to take a leap of faith and press higher. We are at the all-time highs, so we go to pivot resistance, and R1 – 258.65, R2 – 260.29 and R3 – 262.65. A failure from settlement could see a test of support at 254.30.
The Feeder Cattle Index increased and is at 247.83 as of 8/25/2023.
October Live Cattle grudgingly followed Feeders higher as cash cattle dipped last week to a lower average at 182.75. It made the low at 180.40 and the high at 182.30. Settlement was at 181.55. Cutouts are sagging as Labor Day buying is all but over. The rally stopped short of resistance at 182.575 and the low tested support at 21-DMA at 180.60. Settlement was above resistance at 181.175, but the close was weak, in my opinion. Cash is nowhere close to trading as packers likely won’t start buying cattle till mid-week at the earliest. With cutouts weak and futures strong, packers will probably wait until a pullback to look at the cash market. Traders, however, look like they think the South will trade higher as the expiring contract (August) settled at 180.70 with only a few days left to trade. A failure from settlement could see price revisit the 21-DMA. Support then comes in at 179.40. If settlement holds, we could re-test resistance at 182.575.
Boxed beef cutouts were lower as choice cutouts decreased 0.86 to 317.04 and select increased 0.58 to 292.09. The choice/ select spread narrowed and is at 24.95 and the load count was 92.
Monday’s estimated slaughter is 125,000, which is above last week’s 122,000 and last year’s 123,000.
The USDA report LM_Ct131 states: So far for Monday in the Western Cornbelt negotiated cash trade has been slow on very light demand, however not enough purchases for a market test. Negotiated cash trade has been at a standstill in all other feeding regions. The latest established market in any feeding region was last week, with live FOB purchases in the Texas Panhandle from 178.00-179.00. Last week in Kansas live FOB purchases traded at 179.00. In Nebraska last week live FOB purchases traded mostly from 184.00-185.00, with a few live delivered purchases traded at 189.50. Dressed delivered purchases traded from 292.00-295.00, with a few dressed FOB purchases traded at 295.00. In the Western Cornbelt for last week FOB purchases traded from 185.00-186.00 a few up to 187.00, with a few dressed delivered purchases at 292.00 on a light test.
The USDA is indicating no cash trades for live cattle and on a dressed basis (so far).
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, August 31, 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
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