December Lean Hogs gap opened lower, rallied to the high of the day at 69.90 and closed the gap created on the weak open. The high was right at resistance at 69.90 and this proved to be the straw that broke the hog’s back. It broke down and traded to the low of the day at 68.125. It settled near the low at 68.30. The breakdown took price below support at 68.75, keeping the pressure on the Hog market. The disappointing export sales report on Friday, elevated slaughter levels with seasonally increasing hog weights and continued weakness in the cash markets are giving bears a lot of confidence and they are keeping the pressure on futures prices. The USDA is also weighing on the markets. It is predicting US production to increase 705 million pounds in the fourth quarter. This is a huge increase for the fourth quarter. We’ll see… Futures are trading at a larger than normal discount to the Lean Hog Index. This could stunt declines and lead to a short-covering rally if the selling pressure fades. A failure from settlement could see support tested at 67.80. Support then comes in at 66.55. A rally past 68.75 could see resistance revisited at 69.90.
The Pork Cutout Index decreased and is at 92.52 as of 10/13/2023.
The Lean Hog Index decreased and is at 82.11 as of 10/12/2023.
Estimated Slaughter for Monday is 485,000, which is below last week’s 486,000 and last year’s 487,000.
November Feeder Cattle opened higher and rallied to the session high at 252.70. Weaker corn helped sentiment at first but the push above resistance at 252.35 couldn’t be sustained. The market gave up on its rally and pressed lower the rest of the session to the low at 249.525. It settled near the low at 249.925. The breakdown took price through support at the 251.30 support level and back into the lower end of its prior trading range. The breakdown was also follow-through selling from the Bearish Engulfing candle established on Friday. The Feeder index tumbled on Monday and continued pressure here could keep futures under pressure. A breakdown below the Monday low could see support tested at 248.85. The rising 100-DMA is nearby at 248.325. This has to hold or the selling pressure could increase. If settlement holds, we could revisit 251.30 and then 252.35.
The Feeder Cattle Index decreased and is at 248.26 as of 10/13/2023.
December Live Cattle opened higher and traded to the session high at 187.925. It drifted and then broke down mid-morning and traded to the low at 186.15. It settled near the low at 186.55. The breakdown punctured support at the rising 8-DMA now at 186.325 and it held with settlement above it. Cash was stronger last week with packers buying a lot of cattle. Traders expect stronger cash this week but then again, maybe with the large negotiated trade last week the packers won’t be as aggressive this week. So, the market rallies, stalls and then sells off as traders maybe became concerned about packer needs. We are near contract highs. This in my opinion also weighs on traders. They could feel upside is limited and downside risk elevated if packers pull-back on purchasing cattle this week. Cash won’t likely trade till the middle of the week and traders just couldn’t keep price elevated. We’ll see…. A breakdown from settlement could see support tested at 185.75. Support then comes in at 184.35. Trading down to this level puts it back at the lows of the trading range (184.25). If settlement holds, price could revisit the Monday high. Resistance then comes in at 190.075.
Boxed beef cutouts were higher as choice cutouts surged 3.87 to 304.67 and select increased 1.71 to 277.20. The choice/ select spread widened and is at 27.47 and the load count was 87.
Monday’s estimated slaughter is 124,000, which is below last weeks and last year’s 125,000.
The USDA report LM_Ct131 states: Thus far for Monday in all trading regions negotiated cash trade has been at a standstill. Last week in the Southern Plains live FOB purchases traded at 183.00. Last week in Nebraska negotiated cash traded at 185.00 with dressed delivered purchases at 292.00. Last week in the Western Cornbelt live FOB purchases traded at 185.00, while dressed delivered purchases traded from 290.00-292.00.
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, October 17, 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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