Hogs Weaken While Cattle Markets Rally

Ben DiCostanzoGeneral Commentary

June Lean Hogs opened lower, made the high at 104.55 and then broke down below support at 104.35 and continued down ward to the low at 102.225. It settled near the low at 102.475. The cash market has started to work lower and with futures trading at a stiff premium to the cash market, traders took some off the top, taking price back towards its recent lows.  I think this cash breakdown could be temporary as this week’s slaughter was lower and if this develops into a trend could put upward pressure on cash prices and we may see futures regain their footing. The Friday breakdown stopped just shy of support at 101.975 and could be the key to Monday’s price action. If price can hold settlement, we could test resistance at 104.35. Resistance then comes in at 106.85. A failure from support at 101.975 could see price move lower and test support at 100.075.

The Pork Cutout Index decreased and is at 98.59 as of 04/25/2024.

The Lean Hog Index decreased and is at 91.43 as of 04/24/2024.

Estimated Slaughter for Friday is 439,000, which is below last week’s 480,000 and last year’s 450,295. Saturday slaughter is expected to be 4,000, which is below last week’s 67,000 and last year’s 47,415. The estimated total for the week (so far) is 2,379,000, which is below last week’s 2,487,000 and last year’s 2,380,440.

August Feeder Cattle gap opened higher, closed the gap at the session low (258.35) and then rallied into late morning to the high at 261.55. It dipped lower into the close to settle near the high at 260.55.   The rally took price past resistance at 261.05 and the prior highs on the continuous chart the market was failing to overcome from 260.80 and 260.60. It is interesting to note Feeders couldn’t settle above these prior highs. This rally is a good sign but not perfect. The Feeder Index has recovered after breaking down but futures are extremely wide to the index. We could continue to consolidate near the highs until we see some expansion in the index. Thursday saw Feeders close the gap on the morning breakdown and we made a new high for the recent up move in Feeders on the continuous chart. This puts the all-time high from September 15, 2023 at 264.675 back in play for bullish traders. If price can overcome resistance at 261.05 it could test resistance at 262.075. The all-time high is next. If futures fail from settlement, we could test support at 257.925.

The Feeder Cattle Index increased and is at 242.11 as of 04/19/2024.

June Live Cattle opened higher, broke down to the session low at 177.05 and then rallied into late morning to the high at 179.65. It pulled back and settled at 178.575. The rally took price past resistance at 179.40 but it couldn’t hold there and it settled below it. It did settle above the key level at 178.10 giving a positive lift to the market in my opinion. The early breakdown came on the heels of more negative articles about the Bovine Influenza Type A Virus (BIAV). The early decline ignored the fact that packers paid up for cash after successfully working cash lower early in the week. Sentiments changed as cash continued to trade at the higher prices and cutouts came in stronger for the Choice cutouts. This took price to the high in my opinion and then fatigue took over and price moved lower into the close. There is still so much fear for traders that is not reciprocated in the cash market as the packers, needing cattle paid up for it. This virus has not infected beef cattle and traders are reacting as if this is the worst thing to hit the airwaves since the Wuhan virus. Cattle have not died from this but fear mongers’ keep talking about this being the killer disease. We have survived bid flu. No one seems to avoid eating eggs, chicken and Turkey when outbreaks occur. In my opinion, when there are shortages of these products and consumers hear that supplies are short because of bird flu…. They try to buy more from what I see when shopping. Not less. They are afraid prices will go higher, so buy, buy, buy. Yes, a human contracted pink eye or something like that from drinking tainted milk but trying to create fear where this little reason to at the present time is crazy, in my opinion. Health organizations are worse than meteorologists in their predictions. They give the worst-case scenario to protect their b…s, just in case. There is an article that says current drugs can treat this virus. In my opinion, nothing to see here. Packers paid up for cash at the end of the week. Come on…. A breakout above resistance (179.40) could send price upwards to test resistance at 181.175. A breakdown from settlement could see price test support at 178.10.

Boxed beef cutouts were mixed as choice cutouts increased 0.22 to 297.14 and select decreased 0.94 to 288.72. The choice/ select spread widened and is at 8.42 and the load count was 125.

Friday’s estimated slaughter is 113,000, which is even with last week and above last year’s 106,140. Saturday slaughter is expected to be 12,000, which is below last week’s 20,000 and last year’s 21,925. The estimated slaughter for the week is 613,000, which is below last week’s 620,000 and last year’s 626,853.

The USDA report LM_Ct131 states: Thus far for Friday in the Texas Panhandle negotiated cash trade has been at a standstill. In Kansas negotiated cash trade has been slow on light demand. The most recent market in the Southern Plains was Wednesday with live FOB purchases at 182.00. In Nebraska and the Western Cornbelt negotiated cash trade has been slow on light demand. The most recent market was Thursday with live FOB from 184.00-185.00, with a few purchases up to 187.00, with dressed delivered purchases traded from 294.00-295.00 The most recent market in the Western Cornbelt was Thursday with live FOB purchases traded from 184.00-186.00, with a few purchases up to 187.00, with dressed delivered purchases at 294.00, on a light test.

The USDA is indicating cash trades for live cattle from 180.00 – 18.00 and from 290.00 – 303.00 on a dressed basis (so far).

For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, April 30, 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.

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**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


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