October Lean Hogs opened lower and traded to the session high at 77.225. It wasn’t able to take out the Thursday high as outside markets limited Hogs and it fell to the session low at 76.075. This was just below support at 76.175 and it rebounded from here to test the high and failing to make a new high drifted lower to settle at 76.575. Hogs once again impressed as it was able to stay the course while the Cattle, Equity and Crude Oil markets were crushed. The price action formed an inside candlestick as those breakdowns in the other markets limited its upside potential. The Lean Hog Index continues to firm, and traders are hopeful it has formed a bottom and can move higher lending some strength to futures. However, slaughter levels continue to impress, and pork production is soaring as weights are also above last year. This will keep the pressure on Hogs if exports and demand falter. Right now, exports are keeping the hog market viable as consumer demand here in the states has been erratic at best. We are also moving into a seasonal where supplies build excessively and continue into the end of the year, so, we really need to keep exports flowing and boost US demand. If price can rally past the Friday high, it could test resistance at 77.80 and then move towards resistance at 78.80. A failure from settlement could see price test support at 76.175 and then 75.60. A breakdown from here could see a move lower towards 74.25.
The Pork Cutout Index ticked lower and is at 105.64 as of 08/01/2024.
The Lean Hog Index increased and is at 93.53 as of 07/31/2024.
Estimated Slaughter for Friday is 476,000, which is above last week’s 438,000 and last year’s 418,100. Saturday slaughter is expected to be 63,000, which is below last week’s 110,000 and above last year’s 34,089. The estimated total for the week(so far) is 2,455,000, which is above last week’s 2,436,000 and last year’s 2,347,889.
September Feeder Cattle is now the lead contract as its volume has exceeded the volume of the August contract. It opened lower at the high of the day at 251.50 and crashed. The panic built quickly, taking price down through support at 251.50, 248.85, 245.75 and just below the 200-DMA now at 244.55 to the low at 244.20. The 200-DMA contained the selloff and it was over by 9:30 AM as price rebounded a little more than 61.8% of the crash to 249.425 and then drifted lower the rest of the session to settle at 248.15. The settlement was below the key level at 248.85 so bears remain in control of the market in my opinion. Futures sentiment is much more negative than that of the cash market with futures trading at an extreme discount to the Feeder Cattle Index. Producers are frustrated with the futures market but, when traders see economic indicators come out weaker than expected and see the equity markets crash, they look at what is expensive and those that have bad positions in those outside markets, must liquidate positions where they may have profits to help deal with their bad positions. Other traders see the selloff and panic and a snowball effect occurs with prices moving lower and lower until it exhausts itself. With the expanded limits it can go a long way as we saw on Friday. If price can’t hold settlement, we could re-test support at 245.75 and then the 200-DMA. Support then comes in at 242.475. If it holds settlement, it could test resistance at 248.85 and move towards resistance at 251.50.
The Feeder Cattle Index ticked lower and is at 257.72 as of 08/01/2024.
October Live Cattle opened lower and traded to the high at 183.70. It quickly turned south and crashed. It burst through support at the flattening 50-DMA now at 182.90, support at 182.575, 181.175 and stopped just above support at 179.40 at the low of 179.775. Price retraced almost to the high of the day before failing and traded lower to settle at 182.05. The employment report came out and showed the economy was weaker than expected as the unemployment number increased to 4.3% and private payrolls was lower than expected sending equity markets and crude oil crashing. Traders panicked thinking consumers will never eat beef again and sold futures. However, the cash market didn’t crater with the breakdown and cash did make a lower trade at 185.00 for the week on Friday, it also made a higher high for the week at 198.50 while futures were crashing. Packers couldn’t break the market and didn’t really try as they are aware that numbers are tight, and producers are in the position they have been in over the past few years where they are seemingly in control of the cash market. This is with packers continuing to cut back on slaughter as those numbers continue to slow. They are trying to drive cutouts higher and cash prices lower but have been failing at both ends. Cutouts seem stable at around the 311.00 to 315.00 area as retailers have been able to get good supply in this area. Cash prices have peaked for the time being with the live cash high at 200.00 but packers have not been able to pressure price below 180.00. Prices have consistently been trading between 185.00 and 198.50. With the bad employment figures, worries are building the US will be in recession and take away demand for beef. That remains to be seen as consumers continue to gravitate towards beef and likely will continue to as they want to eat something that makes them feel good during these potentially trying times, in my opinion. We’ll see!… If price can hold settlement, it could test resistance at 182.575. The 50-DMA is next and then 184.35. If price can’t hold settlement, it could re-test support at 181.175. Support then comes in at 179.40.
Boxed beef cutouts were mixed as choice cutouts increased 0.98 to 313.77 and select dipped 0.29 to 297.17. The choice/ select spread widened and is at 16.60 and the load count was 110.
Friday’s estimated slaughter is 116,000, which is above last week’s 110,000 and last year’s 115,294. Saturday slaughter is expected to be 3,000, which is below last week’s 10,000 and last year’s 7,020. The estimated slaughter for the week (so far) is 593,000, which is below last week’s 600,000 and last year’s 615,321.
The USDA report LM_Ct131 states: So far for Friday in the Texas Panhandle negotiated cash trading has been inactive on light demand. Not enough purchases for a market trend. The last reported market was on Thursday with live FOB purchases at 188.00. In Kansas and Nebraska negotiated cash trading has been slow with light to moderate demand. In Kansas, compared to the last reported market on Thursday, live FOB purchases traded steady to 7.00 higher from 188.00-195.00. In Nebraska, compared to the last reported market on Thursday, live FOB purchases traded steady at 196.00. Not enough dressed purchases for a market trend. Thursday was the last reported dressed delivered market at 310.00. In the Western Cornbelt negotiated cash trading and demand have been moderate. Compared to the last reported market on Thursday, live FOB purchases traded steady to 2.00 lower from 194.00- 196.00. Not enough dressed purchases for a market trend. Thursday was the last reported dressed delivered market at 310.00.
The USDA is indicating cash trades for live cattle from 185.00 – 198.50 and from 306.00 – 311.00 on a dressed basis (so far).
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, August 06, 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
Fax: 312.256.0109
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
tested support at the
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall not be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.