August Lean Hogs opened higher and rallied all session to the high at 89.35. The low was 87.225 which occurred in the opening couple of minutes and was just above the key level at 87.10. It dipped at the end of the day to settle at 88.45.The rally was follow-through to the upside after Thursday’s bullish Piercing candlestick formation. It closed the gap formed from Tuesday’s low at 88.30 to the Wednesday high at 87.875. It pushed through resistance at 88.325, stopping just below the declining 21-DMA now at 89.65. Settlement was above the gap and the 88.325 resistance level. Do we see more short-covering on Monday inspired by the Piercing candlestick formation or does the 80/ 20 gap rule take over and price reverses lower on Monday? We’ll see!… The cash market remains weak but, is showing signs it is stabilizing. Demand is good as exports did well over the holiday and consumers here are eating pork in adequate amounts. But, supplies of pigs and pork are large with slaughter, weights and therefore production above last year. Futures need to see the cash market recover or it could turn over and test the lows in my opinion. A failure from 88.325 could see price revisit support at 87.10. Support then comes in at 85.325. If price can take out resistance at the declining 21-DMA, it could test resistance at 90.40.
The Pork Cutout Index increased and is at 94.85 as of 07/11/2024.
The Lean Hog Index ticked lower and is at 88.65 as of 07/10/2024.
Estimated Slaughter for Friday is 470,000, which is above last week’s 445,000 and last year’s 456,120. Saturday slaughter is expected to be 26,000, which is below last week’s 160,000 and last year’s 27,068. The estimated total for the week (so far) is 2,386,000, which is above last week’s 2,034,000 and last year’s 2,338,368.
August Feeder Cattle opened unchanged and then broke down to test the Thursday low, making the Friday low at 254.975, just a tick above it. Strong support is just below here at 254.30 and the rising 100-DMA now at 254.25. Bulls took over from here and price rallied to the high at 259.225 at around noon. It drifted the rest of the session and settled at 258.65. The cash market remains extremely strong with the Feeder index making another new all-time high on Thursday at 261.53. The Futures open saw price trading just about 7 handles below the index and the extreme discount didn’t last long. The disappointing aspect of the day was the rally wasn’t stronger to get futures even closer to or above the index. Traders continue to fear the cash market is topping even as we make new all-time highs seemingly on a continuous basis. Remember futures move towards the index as we near expiration and settles to the index. Cash doesn’t look like it will weaken anytime soon as supplies are limited and those buying cattle have been desperate to get them in their hands. The rally took price past resistance at 257.925 and the 21-DMA now at 259.125 with settlement just below the 21-DMA. If price can’t hold settlement, we could test support at 257.925. The rising 50-DMA is next at 257.60. If it could rally past the 21-DMA, it could test trendline resistance at 260.575. Resistance then comes in at 261.05 and then 262.075.
The Feeder Cattle Index decreased and is at 261.04 as of 07/11/2024.
August Live Cattle opened lower and broke down, trading to the low at 181.05. The breakdown took price just below support at 181.175, stopping just above the declining 100-DMA now at 180.90. The market reversed course and rallied to the high at 183.05. It pulled back and settled at 182.375. The rally took price above resistance at 182.575 with settlement below it. The trade in the August contract was listless even with high volume as traders were likely rolling positions into the October contract. The deferred contracts all fared better, settling stronger than the lead contract. Traders continue to trade futures at an extreme discount to where the cash market is trading, even with cash looking a little lower compared to last week’s all-time high. Cash looks like it will average slightly below last week but the average will be higher than the futures. Futures traders got it wrong with the last spot contract and most likely will get it wrong again with the August contract, frustrating producers who likely believe the futures contract is for the benefit of the packer, in my opinion. The wide differential between what is trading in Texas, where most cattle is trading on a formula basis and in Nebraska where trade is mostly on the negotiated front (plus with cattle mostly in short supply) doesn’t help. The CME put out a while ago that it is looking at the Cattle contract to see what improvements it could make to the contract. We’ll see!… Weights are going down but are still well above last year’s weight, helping production as packers can’t find enough cattle to slaughter in my opinion. This has helped keep production at reasonable levels, but weights have come closer to last year by 10# so packers may need to get out and pay up to buy more cattle. I’ve been told they are starting to buy greener cattle so weights and grading may come down even more as they are taking cattle whenever they can and getting them to slaughter. If price can get above resistance at 182.575, it could test resistance at 184.35. Resistance then comes in at 185.75. If price can’t hold settlement, it could re-test support at 181.175.
Boxed beef cutouts were mixed as choice cutouts increased 0.41 to 322.06 and select decreased 1.07 to 302.31. The choice/ select spread widened and is at 19.75 and the load count was 102.
Friday’s estimated slaughter is 118,000, which is above last week’s 116,000 and below last year’s 120,863. Saturday slaughter is expected to be 7,000, which is below last week’s 47,000 and last year’s 8,110. The estimated slaughter for the week (so far) is 601,000, which is above last week’s 522,000 and below last year’s 633,391.
The USDA report LM_Ct131 states: Thus far for Friday in the Southern Plains negotiated cash trading has been inactive with very light demand. In Nebraska and Western Cornbelt negotiated cash trading has been limited with very light demand. Not enough purchases in any region for a market trend. In the Southern Plains the last reported market was on Wednesday with live FOB purchases traded at 188.00. In Nebraska the last reported live FOB purchase market was on Thursday with purchases at 198.00. The last reported dressed delivered purchase market was on Wednesday with purchases at 312.00, on a light test. In the Western Cornbelt the last reported live FOB purchase market was on Thursday with purchases from 197.00-198.50. Not enough dressed delivered purchases for a market trend. Last week dressed delivered purchases traded from 312.00-315.00.
The USDA is indicating cash trades for live cattle from 185.00 – 199.00 and from 308.00 – 317.00 on a dressed basis (so far).
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, July 16, 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.
**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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