February Lean Hogs opened unchanged and then broke down to the session low at 69.50. It reversed course and raced to the high at 71.925. Trade stalled, pulling back into the middle of the range age for the rest of the session and settled at 70.80. 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. I was at my local Costco store and boneless pork chops were down 50 cents to $2.49 per pound. This is lower than their price for Chicken Breasts, which remain ay $2.99 per pound. Disappointing for producers. 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. Futures are forming a ledge as this is the third session in a row trading between 72.00 and 69.50. If futures breakdown below settlement, we could see a breakdown to re-test support at 69.90. A continuation lower (below the Monday low) could see support tested at 67.80. If futures hold settlement, we could see a re-test of the 38.2% retracement level at 70.475. Resistance then comes in at 71.325 – 71.85 and then the Friday high. Resistance then comes in at 72.80.
The Pork Cutout Index decreased and is at 84.92 as of 12/01/2023.
The Lean Hog Index decreased and is at 70.58 as of 11/30/2023.
Estimated Slaughter for Monday is 488,000, which is above last week’s 476,000 and last year’s 486,000. Saturday slaughter was revised lower to 285,000, which is below last week’s 346,000 and above last year’s 143,000. The estimated total for the week (so far) is 2,695,000, which is above last week’s 2,225,000 and last year’s 2,583,000.
January Feeder Cattle opened lower and traded down to a new low for the down move at 209.15. It reversed course and rallied to the session high at 214.525. This is just below resistance at 214.55. Resistance stymied the bulls and it broke down the rest of the session approaching the low and settled near the low at 210.525. The break down took price below support at 210.30 but, it held with settlement above it. If futures can’t stay above settlement, we can see fresh lows and a test of support at 208.50. Support then comes in at 207.50. If settlement holds, we could see a test of resistance at 212.15. Resistance then comes in at 213.20, 214.15 and then 214.55.
The Feeder Cattle Index decreased and is at 223.27 as of 12/01/2023.
February Live Cattle gap opened lower and broke down to the low of the day at 166.625. This is just below support at 166.975 and it held as futures surged and closed the opening gap on its way to the high at 170.00. The rally couldn’t sustain itself, reversing yet again and approaching the low and settling near the low at 167.075. Fear reigns in the futures market as traders see fundamentals breaking down in the cash market. The low slaughter and increase in imports to feedlots have filled them up and we are seeing levels higher than last year easing the fear of low supplies. Packers have successfully stalled the rising cash prices and reversed them as they have been taking a beating and losing money. The reason for this has been the inability for cutouts to rally as the retail industry has surprisingly been able to bring cutout prices lower while keeping load counts at higher levels. Prices and demand have been stable as consumers continue to prefer beef products and with cutouts making new lows, maybe prices can cheapen for consumers. The breakdown took price below support at 166.975, but settlement was just above it. Taking out the low could see price test support at 164.90. Support then comes in at 161.75. If settlement holds, we could test resistance at 168.625. Resistance then comes in at 170.375.
Boxed beef cutouts were lower as choice cutouts fell 2.74 to 294.72 and select dropped 2.66 to 262.83. The choice/ select spread narrowed and is at 31.89 and the load count was 169.
Monday’s estimated slaughter is 125,000, which is above last week’s 123,000 and even with last year.
The USDA report LM_Ct131 states: Thus far for Monday in the Southern Plains, Nebraska and the Western Cornbelt negotiated cash trade has been at a standstill. Last week in the Southern Plains and Nebraska live FOB purchases traded from 174.00-175.00. Last week in Nebraska dressed delivered purchases traded at 275.00. Last week in the Western Cornbelt live FOB purchases traded from 173.00-175.00 and dressed purchases from 274.00-275.00.
The USDA is indicating no cash trades for live cattle and on a dressed basis (so far).
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be on Tuesday, December 05, 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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