February Lean Hogs made an early attempt to rally, opening higher and up ticking to the high at 72.00. The high was just under resistance at the 50% retracement level at 72.05. This is a retracement from the 78.70 high to the 65.40 recent low on the continuous chart. Cash fundamentals remain weak and gap close sellers took control of the price action and sent prices lower. The gap was created form the breakdown on November 24th from the November 23rd low. The gap is from 71.40 to 71.575 and was closed on Thursday. The breakdown took price down to the low at 69.80. This is just below support at 69.90. It settled near the low at 70.10, just above support. The session formed a Bearish Engulfing Candlestick pattern after a short retracement rally. The odds favor a continuation lower off of the pattern. Futures are trading at a discount to the index again, when the Feb contract usually trades at a premium to the index. This could limit downside as traders could view futures as cheap. But the index continues to work lower and the December contract is anticipating the index to continue lower as it closed below the index at 68.60. Only thing you can say is We’ll see…. If futures breakdown below the Friday low, we could see a breakdown to re-test support at 68.75. A continuation lower could see support tested at 67.80. If futures hold settlement, we could see a test of the 38.2% retracement level at 70.475. Resistance then comes in at 71.325 – 71.85.
The Pork Cutout Index decreased and is at 85.11 as of 11/30/2023.
The Lean Hog Index decreased and is at 71.35 as of 11/29/2023.
Estimated Slaughter for Friday is 480,000, which is above last week’s 455,000 and below last year’s 484,000. Saturday slaughter is expected to be 294,000, which is below last week’s 346,000 and above last year’s 143,000. The estimated total for the week (so far) is 2,704,000, which is above last week’s 2,225,000 and last year’s 2,583,000.
January Feeder Cattle opened higher and traded up to the high at 221.45. It failed and crashed as it has liked to do most days recently. It broke down the rest of the session to the low at 213.925. It settled near the low at 214.425. Futures are once again trading at an extreme discount to the cash index in my opinion. This could limit downside as traders may look to narrow the discount. However, the continued failure of the futures indicates the negative sentiment traders are feeling since that fateful COF report in October. Whereas the premium it had rode upon during the rally to all-time highs leading cash higher, it is now putting pressure on the cash market as the euphoria has faded, in my opinion. This keeps the pressure on bulls going into next week. Follow-through to the downside could see support tested at 213.20 and then 212.15. The recent low is a tick under support at 212.125. Pushing past here could see support tested at 210.30. If price can reclaim resistance at 214.55, we could see a test of resistance at 215.45, 216.125 and then 217.375. Resistance then comes in at 219.40 and 220.875.
The Feeder Cattle Index increased and is at 225.89 as of 11/30/2023.
February Live Cattle opened unchanged and tried to rally, trading to the high at 172.425. This is just above resistance at the declining 8-DMA now at 172.35 and below the prior all-time high at 172.75. Bears came in and pressured the market lower, cascading downward the rest of the session to the low at 168.925. It settled near the low at 169.125. The inability of futures to sustain the rally from Tuesday into the Wednesday weekly high put pressure on the cash market which created more bearish sentiment in the futures which kept cash weak which kept futures weak which… you get the picture…. Cutouts remain weak and this hasn’t helped sentiment. The breakdown stopped just shy of support at 168.625, which is also the low of the recent down move. 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 170.375. Resistance then comes in at the declining 8-DMA.
Boxed beef cutouts were mixes as choice cutouts decreased 1.56 to 297.46 and select increased 0.74 to 265.49. The choice/ select spread narrowed and is at 31.97 and the load count was 159.
Friday’s estimated slaughter is 122,000, which is above last week’s 118,000 and below last year’s 124,000. Saturday slaughter is expected to be 19,000, which is below last week’s 38,000 and last year’s 28,000. The estimated total for the week (so far) is 635,000, which is above last week’s 538,000 and below last year’s 660,000.
The USDA report LM_Ct131 states: Thus far for Friday in the Texas Panhandle negotiated cash trade has been at a standstill. The most recent live FOB purchases were Monday at 175.00. In Kansas negotiated cash trade has been mostly inactive on light demand. The most recent market was Tuesday with live FOB purchases at 174.00. In Nebraska negotiated cash trade has been slow on light demand. The most recent market in Nebraska was Thursday with live FOB purchases from 174.00-175.00 and dressed delivered purchases at 275.00. In the Western Cornbelt negotiated cash trade has been slow on light demand. The most recent live FOB purchases were on Thursday from 174.00-175.00 and dressed delivered at 275.00.
The USDA is indicating cash trades for live cattle from 171.00 – 175.00 and from 270.00 – 275.00 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
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
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