February Lean Hogs opened lower and broke down to the low of the day at 68.00. It reversed and rallied to the high of the day at 70.50. It consolidated the rest of the session and settled near the high at 70.00. The opening breakdown tested support at the declining 8-DMA now at 68.20. The rally took price past strong resistance at 69.90 and the 50-DMA, now at 70.10. Settlement was in between the levels. Traders are hoping cash prices have stabilized and are looking for a recovery in the cash market. Hogs normally rally at this time of year so seasonality may be playing a part in the recovery off the blow off crash from Tuesday. It was a positive force that the market continued to rally after Thursday’s limit up move. We’ll see…. If price can hold settlement, we could test resistance 71.325 – 71.85. If futures fail to hold settlement, we could see a breakdown to re-test support at 68.75. Support then comes in at the declining 8-DMA and then 67.80.
The Pork Cutout Index increased and is at 83.91 as of 01/04/2024.
The Lean Hog Index increased and is at 65.86 as of 01/03/2024.
Estimated Slaughter for Friday is 489,000, which is above last week’s 479,000 and last year’s 456,000. Saturday slaughter is expected to be 440,000, which is above last week’s 313,000 and last year’s 418,000. The estimated total for the week (so far) is 2,381,000, which is above last week’s 2,221,000 and last year’s 2,346,000.
March Feeder Cattle opened higher and rallied to the high of the day at 228.125. The high is a new high for the recent up move, but it didn’t help Feeders technically, in my opinion. The high stalled just above resistance at 228.05 and the price action quicky turned south. It broke down to the low of the day at 223.475 and then consolidated the rest of the session and settled near the low at 224.15. The breakdown took price back into the lower end of the rectangle it is trading in, the high just extended the range in my opinion. The low of the rectangle is at 222.10. In my opinion, traders are unsure if the market can sustain rallies and is looking for more information on the direction of cash prices. The breakdown took price back below the 50-DMA, now at 225.35 and tested support at 223.55. The downward slope of the 50-DMA is containing rallies, and we likely need some more flattening of the 50-DMA to be able to see it become supportive. Right now it is in my opinion, limiting the recovery. A rally past the Friday high could see a test of resistance at 229.825. A failure below the low could see support tested at 222.225 and then the low of the rectangle. Support then comes in at 220.875.
The Feeder Cattle Index decreased and is at 228.09 as of 01/04/2024.
February Live Cattle opened lower and rallied to the high at 172.325. It couldn’t hold the rally and broke down, trading to the low at 170.10. It consolidated the rest of the session and settled near the low at 170.575. The rally stalled just below resistance at 172.75 and the low challenged support at 170.375. Support held with the settlement above it. The breakdown formed an outside down candlestick, but it continued the consolidation within the breakout candle to the upside from Tuesday. The enthusiasm in the market was tempered in my opinion from the lower trade at 172.00 in the cash market. With the bad weather most markets are facing some producers sold cattle at packer prices to get them out of their hands. Futures traders took this as a sign the cash market isn’t ready to race higher and sold futures off to support. A breakdown below the low could see price test support at 168.625. Support then comes in at 166.975. If settlement holds, we could retest resistance at 172.75. Resistance then comes in at the declining 50-DMA now at 173.25.
Boxed beef cutouts were higher as choice cutouts increased 1.26 to 277.16 and select increased 0.71 to 259.53. The choice/ select spread widened and is at 17.63 and the load count was 106.
Friday’s estimated slaughter is 124,000, which is below last week’s 125,000 and last year’s 126,000. Saturday’s slaughter is expected to be 52,000, which is above last week’s 33,000 and below last year’s 53,000. The estimated total for the week (so far) is 556,000, which is above last week’s 508,000 and below last year’s 565,000.
The USDA report LM_Ct131 states: Thus far for Friday in the Southern Plains negotiated cash has been slow on light demand. Last week in the Texas Panhandle live FOB purchases traded at 172.00. Last week in Kansas live FOB purchases traded at 172.00-173.00. In Nebraska negotiated cash has been slow on light to moderate demand. Compared to Thursday live FOB purchases mostly steady at 173.00. The most recent dressed delivered market was Thursday from 274.00-275.00. In the Western Cornbelt negotiated cash has been slow on light demand. The most recent live FOB purchase market was on Thursday at 175.00 and dressed purchases from 274.00-275.00.
The USDA is indicating cash trades for live cattle from 172.00 – 175.50 and from 272.00 – 276.00 on a dressed basis (so far).
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be delayed to Tuesday, January 9, 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.
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.