December Lean Hogs surged on Thursday, coming close to going up limit at the high of the day at 72.50 and settling near the high at 72.275. The low was the opening price at 69.35. I think short covering was the order of the day as futures are trading at a stiff discount to the Lean Hog Index and the break down, in my opinion was just too far from the cash index. The rally stalled just below resistance at 72.80 and it closed the gap from the October 2nd high at 71.375 and the September 29th low at 71.775. Settlement was above resistance at 81.85 and above the gap close. We are in a down trend and when you close gaps, the odds favor a return to the prevailing trend. But we did close above the gap so… we’ll see…. I think traders were surprised by the strong export sales that came out before the open. (see below) With foreigners purchasing at these cutout levels, maybe the thought is demand is good at the current cash levels and the downside could be limited. Only time will tell if this is true, but it is good to see a good sales report after some erratic sales weeks. Some good, some not so good. In my opinion futures must continue to steamroll past resistance at 72.80 or we could continue to be pressured. A rally past 72.80 could see resistance approached at 74.25. A break down below 71.85 could see support tested at 71.325 and then move towards the 69.90 support level.
Export Sales – Net sales of 43,000 MT for 2023 were up 57 percent from the previous week and 61 percent from the prior 4-week average. Increases were primarily for Mexico (14,600 MT, including decreases of 300 MT), China (9,400 MT, including decreases of 100 MT), South Korea (4,400 MT, including decreases of 200 MT), Japan (3,400 MT, including decreases of 200 MT), and Australia (2,600 MT). Net sales reductions of 100 MT for 2024 were reported for Japan. Exports of 28,300 MT were down 6 percent from the previous week, but up 6 percent from the prior 4-week average. The destinations were primarily to Mexico (11,700 MT), Japan (3,300 MT), China (3,000 MT), South Korea (2,400 MT), and Canada (2,000 MT).
The Pork Cutout Index declined and is at 95.83 as of 10/04/2023.
The Lean Hog Index decreased and is at 84.28 as of 10/03/2023.
Estimated Slaughter for Thursday is 481,000, which is even with last week and below last year’s 490,000. The estimated slaughter for the week (so far) is 1,935,000, which is above last week’s 1,923,000 and last year’s 1,929,000.
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be on Tuesday, October 10, 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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