July Lean Hogs opened higher, traded down to the low of the day at 87.65, drifted for a bit and then rallied to the session high at 90.25. It pulled back and then settled at 89.50. The initial breakdown took price below support at 88.325but it stopped just shy of taking out the Thursday low. Finding support at Thursday’s low (87.60), the market sat for a bit and then short-covering took over as the morning cutout was strong and we are at month end/ quarter end and traders liquidated positions, in my opinion. The rally stalled just below resistance at 90.40 and it pulled back. Settlement was in the upper end of the trading range, but we are once again trading within the 88.325 – 90.40 trading band. We have a short week next week with the Independence Day holiday so in my opinion, trading could be quiet and consolidate. Exports were strong on the Thursday report, but with production elevated due to higher-than-expected slaughter and weights well above last year, upside could be limited if consumer demand doesn’t pick up. I believe the Hogs and Pigs report was bearish with hog numbers higher than estimated. We need to see the retail industry feature pork in a big way or price can fall going forward. We have lots of pork out there in my opinion. A failure from settlement could see price revisit support at 88.325 and a breakdown from there could send price down to test support at 87.10. If price can take out resistance at 90.40, it could test resistance at 92.375.
The Pork Cutout Index decreased and is at 96.67 as of 06/27/2024.
The Lean Hog Index decreased and is at 89.75 as of 06/26/2024.
Estimated Slaughter for Friday is 472,000, which is below last week’s 474,000 and above last year’s 447,699. Saturday slaughter is expected to be 64,000, which is above last week’s 46,000 and below last year’s 70,241.The estimated total for the week (so far) is 2,421,000, which is above last week’s 2,419,000 and last year’s 2,329,564.
August Feeder Cattle opened lower, attempted to trade higher and then fell apart. It broke down to the session low at 258.30, drifted for a bit and then surged to the high of the day at 261.65. The rally didn’t last long and it spent the rest of the session in give back mode, taking price lower and it settled in the lower end of the trading range at 259.30. The Feeder Cattle index has been making all-time highs reaching 259.04 on Thursday and ending the week at 258.60. Feeder weight cattle continue to trade strong but futures traders seem to be nervous the increase won’t last. They have been content to allow futures to consolidate below the recently achieved all-time high at 264.95 as they wait for the holiday week to be over and see how cash prices move after the holiday week. The breakdown stalled just above support at 257.925 and stopped shy of resistance at 262075. If price can’t hold settlement, we could test support at 257.925. The rising 50-DMA is next at 257.125. Id settlement holds, it could revisit resistance at 261.05 and then 262.075. Resistance then comes in at 264.675.
The Feeder Cattle Index decreased and is at 258.60 as of 06/27/2024.
August Live Cattle opened higher and traded to the high of the day at 187.325. This was right in between the prior two days highs and below resistance at 187.725. The inability to move above here sent price lower as profit taking took over and then the panic over missing out at selling at the highs took price down to the low at 185.075. It settled near the low at 185.425. The low and settlement was below support at 185.75. It was month end/ quarter end and holiday fears that saw traders liquidate positions in my opinion. Futures have rallied nicely and with this being the end of quarter, they decided to get out and re-evaluate when we start the new month. Cash had been quiet and nerves took over for traders, in my opinion. The talk was for cutouts to fail two weeks ago and it hasn’t happened. Cutouts were strong again today but the fear is cutouts will turn and take the cash market with it. Packers have slowed the kill in front of a holiday and have delayed buying cattle as long as they could with trades ending up around steady for cash and cutouts strong which the packer will call a win for the week. The bad attitude towards cutouts and cash prices stems from a history of summer declines when cattle numbers were rising along with weights and weakening consumer demand. But with cattle numbers declining, and weights going up due to packer demand and cheap corn assisting, I see a potential rally into the summer. Packers have struggled to buy cattle and slaughter is down due to a large decline in cow slaughter, in my opinion. Consumers are spending more time at home as they don’t go into the office as much, in most cases 3-days in the office and 2-days at home so in my opinion, expenditures for clothing and travel are down. They are cooking at home more since the pandemic, I think liking the control they have over how they prepare their food and I feel that will continue. We are in an election year and I feel the government will do everything possible to keep consumers spending. If price can hold settlement, it could test resistance at 185.75. Resistance then comes in at 187.725. If price can’t hold settlement, it could test support at 184.35. Support then comes in at the rising 13-DMA now at 182.95.
Boxed beef cutouts were higher as choice cutouts jumped 2.99 to 326.32 and select increased 1.80 to 304.5. The choice/ select spread widened and is at 21.82 and the load count was 94.
Friday’s estimated slaughter is 119,000, which is below last week’s 120,000 and last year’s 124,655. Saturday slaughter is expected to be 16,000, which is below last week’s 19,000 and last year’s 22,840. The estimated slaughter for the week (so far) is 609,000, which is below last week’s 620,000 and last year’s 650,573.
The USDA report LM_Ct131 states: Thus far for Friday in the Texas Panhandle negotiated cash trade has been slow on light demand. There have been a few early live FOB purchases at 190.00, however not enough purchases for a market trend. Last week in the Texas Panhandle live FOB purchases traded from 189.00-190.00. In Kansas negotiated cash has been moderate on trade and demand. Compared to last week in live FOB purchases traded unevenly steady at 190.00. In Nebraska and the Western Cornbelt negotiated cash trade has been slow on moderate demand. There have been a few early live FOB purchases at 198.00, however not enough trade for a market test. Last week in Nebraska, live FOB purchases traded from 197.00-198.00, with few up to 198.50, dressed delivered purchases from 310.00-312.00. Last week in the Western Cornbelt live FOB purchases traded from 197.00-198.00, dressed delivered purchases at 310.00, with a few up to 314.00, on a light test.
The USDA is indicating cash trades for live cattle from 188.00 – 200.00 and from 306.00 – 317.50 on a dressed basis (so far).
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, July 02, 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.
**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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