December Lean Hogs opened lower, traded to the low of the day at 69.175 and quickly raced higher, trading to the high at 70.65. All in the first 45-minutes of the session. It spent the rest of the session working its way down towards the low, settling near the low at 69.50. I think the session was set back before it even opened as Thursday’s one day cutouts were slightly lower with a low load count and export sales (delayed a day due to Monday’s holiday) cratered after last week’s huge sales dampened sentiment of traders, in my opinion. Exports came in at 21,100 MT, down 51% from last week and 32% below the 4-week average. A disappointing number to say the least. Morning cutouts dropped some more on a heavy load count, further strengthening bears, in my opinion. Price couldn’t take out Thursday’s low however, so bulls remain hopeful. Slaughter levels remain elevated over last year, which could potentially keep a lid on cutouts and cash hogs, especially with demand so erratic, in my opinion. Settlement was below support at 69.90, keeping the pressure on bulls. A failure from settlement could see support tested at 68.75. Support then comes in at 67.80. A rally past 69.90 could see the Friday high revisited. Resistance then comes in at 71.325.
The Pork Cutout Index decreased and is at 93.09 as of 10/12/2023.
The Lean Hog Index ticked higher and is at 82.42 as of 10/11/2023.
Estimated Slaughter for Friday is 480,000, which is above last week’s 476,000 and last year’s 478,000. Saturday slaughter is expected to be 187,000, which is above last week’s 151,000 and last year’s 113,000. The estimated total for the week (so far) is 2,609,000, which is above last week’s 2,562,000, and last year’s 2,555,000.
November Feeder Cattle couldn’t sustain Thursday’s breakout rally. It opened higher and traded to a new high at 253.85 and then fell apart. It broke down the rest of the session, making the low at 251.35. It settled near the low at 251.575. The breakdown took price through support at 252.35 and it approached the 251.30 support level. This could change sentiment in Feeder Cattle as the price action formed a Bearish Engulfing candle. I think negative outside market action had an effect on cattle as the instability in the world has caused surging Gold and Crude Oil and a weakening Equity market. A breakdown below 251.30 could see support tested at 248.85. This would put price back in the lower end of the trading range we just yesterday, broke out above. Wow!! A rally past 252.35 could see at test of the Friday high. Resistance is nearby at 254.30 and then the 50-DMA now at 254.675.
The Feeder Cattle Index decreased and is at 250.11 as of 10/12/2023.
December Live Cattle gap opened higher at the session high at 188.125. It broke down the rest of the session to the low at 186.60. It settled near the low at 186.75. Once again, outside market price action due to the expanding conflict in the Middle East as a result of the terrorist attack on Israel pressured Cattle. Weak exports may also have played a lesser role in sentiment as sales were down 32% from last week and 29% below the 4-week average at 9,000 MT. The cash market firmed this week as fundamentals are friendly, but the outside pressures were too much for futures traders to ignore in my opinion. The situation in the Middle East could continue to impact trading into next week. On the technical side, it also formed a Bearish Engulfing candle, just a day after breaking above its trading range. With the rally stopped dead in its tacks below resistance at the 21-DMA (188.45) and falling back, futures are in danger next week of falling back into its prior trading range. A breakdown from settlement could see support tested at the 8-DMA now at 186.25 and then 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 Friday high. Resistance then come in at 190.075.
Boxed beef cutouts were mixed as choice cutouts decreased 0.39 to 300.80 and select increased 0.47 to 275.49. The choice/ select spread narrowed and is at 25.31 and the load count was 92.
Friday’s estimated slaughter is 112,000, which is even with last week and below last year’s 113,000. Saturday slaughter is expected to be 6,000, which is below last week’s 17,000 and last year’s 38,000. The estimated total for the week ( so far) is 617,000, which is below last week’s 628,000 and last year’s 662,000.
The USDA report LM_Ct131 states: Thus far for Friday in the Southern Plains negotiated cash trade has been limited on moderate demand. The most recent market in the Southern Plains was Wednesday with live FOB purchases at 183.00. In Nebraska negotiated cash trade has been slow on moderate demand. Compared to Thursday live FOB purchases traded 1.00 higher at 186.00, on a light test. The most recent dressed delivered market was Thursday at 292.00. In the Western Cornbelt negotiated cash trade has been slow on moderate demand. There has been a few purchases at 187.00, however not enough purchases for a market trend. The most recent live FOB purchases was Thursday from 184.00- 186.00 mostly at 185.00. The most recent dressed delivered purchase market was Thursday from 290.00-292.00.
The USDA is indicating cash trades for live cattle from 181.00 – 187.00 and from 288.00 – 299.25 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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