February Lean Hogs gap opened lower, made an early low and recovered, closing the gap. It made the high at 68.875, which is just above the key level at 68.75 and then broke down. It traded down to the session low at 67.425 and settled near the low at 67.775. This is just below support at 67.80. Sounding like a broken record…Cash fundamentals continue to weaken and the indices are breaking down. Slaughter is up, at its highest levels of the year and production is soaring as weights are also at high levels. This is limiting prices as production is seemingly outpacing demand. This is with Exports looking good as sales came in at 25,900 MT for 2023 and 10,100 MT for 2024. That is a total of 36,000 Mt. Prices are coming down in stores and for exports and the weak dollar has also assisted exports. But the production levels are high and prices continue lower trying to spur demand. Feb futures remain cheap to cash as it usually trades at a 6 -7 handle premium to the index. Optimism is lacking in the hog market. Smithfield is ending contracts with 26 suppliers in Utah because of oversupply, weak consumer demand and they are claiming high feed prices. China has seen its hog and pork market collapse as disease continues to run through China as producers sell as fast as they can, accelerating losses and leading to more selling at ever weaker prices. Demand is also down for pork as a wave of illness and a weakening economy has put consumers on the sidelines. If futures breakdown below the low, we could see a breakdown to test support at 66.55. A continuation lower could see support tested at the October 20th low at 65.40. Support then comes in at 64/80. If futures can reclaim the key level at 67.80, we could see a re-test of resistance at 68.75. Resistance then comes in at 69.90.
The Pork Cutout Index decreased and is at 83.94 as of 12/06/2023.
The Lean Hog Index decreased and is at 69.43 as of 12/05/2023.
Estimated Slaughter for Thursday is 488,000, which is above last week’s 486,000 and below last year’s 494,000. The estimated total for the week (so far) is 1,946,000, which is above last week’s 1,930,000 and below last year’s 1,956,000.
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
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
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