February Lean Hogs opened lower and traded down to the low of the day at 71.00. It reversed and rallied to the high of the day at 72.45. It couldn’t sustain the rally and repeatedly attempted to test the low. It settled in the lower middle of the range at 71.575. It formed a Doji candlestick indicating indecision after attempting to take out resistance and failing. The rally took price past resistance at the 50% retracement level at 72.05 of the 78.70 high from September 20th to the 65.40 low on October 20th on the continuous chart. It failed to challenge resistance at 72.80 and the doji close should make bulls nervous in my opinion. The cash market continues to suffer as the indices remain weak as slaughter levels remain high keeping supplies plentiful and pricing power weak, in my opinion. If futures clear the 50% retracement level, we could see a re-test of resistance at 72.80. Resistance then comes in at the 61.8% retracement level at 73.625. If futures fail to hold settlement, we could see a breakdown to re-test support at the 38% retracement level at 70/475. A continuation lower could see support tested at the flattening 50-DMA now at 70.025 and the nearby 69.90 support level. The Quarterly Hogs and Pigs Report comes out on Friday and could lay the foundation for the price action into 2024.
The Pork Cutout Index decreased and is at 84.48 as of 12/15/2023.
The Lean Hog Index decreased and is at 67.15 as of 12/14/2023.
Estimated Slaughter for Monday is 489,000, which is above last week’s 462,000 and last year’s 481,000. Friday slaughter was revised lower to 471,000. The estimated total for the week (so far) is 2,682,000, which is above last week’s 2,674,000 and last year’s 2,580,000.
March Feeder Cattle opened higher at the low of the day at 222.45. It surged to an early high, drifted through mid-morning then attempted a breakout, making the high of the day at 226.30 then couldn’t sustain it, pulling back and settling at 224.15 in the lower middle of the day’s range. It made a long shadow as bears came back into the market pressuring the price action. The rally took price past resistance at 225.675 and it stalled below resistance at 226.925. It settled below resistance at 224.475 so this in my opinion will key trade on the open on Tuesday. If Feeders can trade above 224.475, it could revisit the Monday high. Resistance then comes in at 228.05. A failure below settlement, could see a test of now support at 223.55 and then 222.225. Support then comes in at 220.875. The cash market could behave in an erratic fashion as we near the holidays and the end of the year as feeder trade could be sparse, making the index volatile, in my opinion.
The Feeder Cattle Index decreased and is at 218.15 as of 12/15/2023.
February Live Cattle opened enthusiastically on Monday, gap opening higher and racing to the high of the day at 171.00. It broke down hard from the high and closed the gap before making a last-ditch effort to bounce back and retake the high trade. It stalled just below the high and then broke down at the end of the session to the low at 169.40, settling near the low at 169.625. Not the way bulls and producers wanted to see the day end. The price action formed a Shooting Star candlestick and is a red candle away from an Evening Star Candlestick Formation. This is a bearish formation and not the way producers would like the week before Christmas to go, in my opinion. The rally took price past resistance at the declining 21-DMA on the continuous chart now at 170.00 and the nearby 170.375 resistance level. The burst through it and then the reversal and close below puts pressure on the market in my opinion. Again, after a brilliant open, not the way producers want the week to start. I think the initial excitement came about as the cash market ended the week on a strong note with packers paying up and buying cattle at 170.00 into the weekend. Prices could be volatile as estimates come out for the upcoming Cattle on Feed Report on Friday. Some are expecting a bullish report. We’ll see…. A breakdown below settlement could see price test support at 168.625. Support then comes in at 166.975. A close below 168.625 could be a bearish signal for cattle. A rally past 170.375 could see a retest of the Monday high and negate the bearish candle formation. If bulls get control after breaking the high, it could approach resistance at 172.75.
Boxed beef cutouts were mixed as choice cutouts fell 2.71 to 288.93 and select jumped 2.90 to 263.72. The choice/ select spread narrowed and is at 25.21 and the load count was 102.
Monday’s estimated slaughter is 125,000, which is below last week’s 126,000 and above last year’s 99,000.
The USDA report LM_Ct131 states: Thus far for Monday in all trading regions negotiated cash was at a standstill. Last week live FOB purchases traded at 170.00. Last week In Nebraska live FOB purchases traded from 168.00-170.00, while dressed delivered purchases traded from 267.00-268.00. Last week in the Western Cornbelt live FOB purchases traded from 167.00-169.00, while dressed purchases traded at 267.00.
The USDA is indicating no cash trades for live cattle and 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 19, 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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