December Lean Hogs opened higher, reversed and traded down to the low of the day at 70.625. The low found support just above the 38.2% retracement level (70.475) and raced higher. It rallied to the high of the day at 73.125, which is just below resistance at the declining 50-DMA at 73.475 and the 61.8% retracement level at 71.625. It pulled back the rest of the session and settled in the middle of the range at 71.90. Hogs are basically consolidating within 38.2 % – 61.8% retracement range of the September 20th high at 78.70 to the October 20th low at 65.40 as traders are waiting for something to happen to the cash markets which have stabilized. But, with ample supplies and good demand the cash markets aren’t looking like they have the ability to get a strong recovery bounce, in my opinion. Producers are losing money while the packing industry is all smiles as they are able to get needed supply without the need to get aggressive. I may be wrong but, I think this could reverse at some point in 2024 as I believe producers won’t be expanding and probably will be pulling back on production. If they are losing money, why would they expand? At least that’s how I look at it. Settlement was just above the key level at 71.85 and just below the 50% retracement level at 72.05. A bounce above here could see a re-test of resistance at 72.80 and the 61.8% retracement level. Resistance then comes in at 74.25. A break below 71.85 could see support tested again at 71.325 and then the 38.2% retracement level. Support then comes in at 69.90.
The Pork Cutout Index down ticked and is at 87.87 as of 11/09/2023.
The Lean Hog Index increased and is at 76.87 as of 11/08/2023.
Estimated Slaughter for Friday is 452,000, which is below last week’s 480,000 and above last year’s 442,000. Saturday slaughter is expected to be 191,000, which is below last week’s 260,000 and above last year’s 99,000. The estimated slaughter for the week (so far) is 2,576,000, which is below last week’s 2,671,000 and above last year’s 2,501,000.
January Feeder Cattle opened higher and broke down to a new low for the recent down move at 223.625. It recovered and rallied to the high at 227.55. It drifted lower and settled at 226.425. The decline stopped jus above support at 223.55 and the recovery stopped just shy of resistance at 228.05. The price action was tired and hopefully that means a recovery is due. The break down was fierce and harsh and Friday everyone took a step back and looked forward to the week-end. The index is following futures lower and any acceleration in the decline of the index could fuel the futures decline, just as the rally to the all-time high fueled the index higher. On the rally futures maintained a stiff premium to the index. On the decline futures are at a stiff discount to the index. Traders like to maintain these differentials it seems until they don’t. That’s will be when sentiment likely returns to the upside. A breakdown from settlement could see price revisit support at 225.675 and then 224.475. A continued washout below here could see price re-test support at 223.55 and then 222.225. Support hen comes in at 220.825. If settlement holds, resistance is nearby at 226.925, then 228.05. A bigger bounce could see resistance tested at 229.825 and then the rising 200-DMA now at 230.10.
The Feeder Cattle Index decreased and is at 235.42 as of 11/09/2023.
February Live Cattle is now the lead contract as its volume has surpassed the volume of the December contract. It opened higher at the high at 175.30. It broke down to the low of the day at 173.65, consolidated and settled at 174.65. The breakdown took price to a new low for the down move. It broke through trendline support at 174.575 and the key level at 174.425 and settled above them. The low stopped just shy of the rising 200-DMA now at 173.15. Lots of support here that must hold in my opinion. It was a narrow range compared to the past four sessions. This could ignite price up or down on a move above the high or below the low. The cash market has collapsed as a result of the futures debacle and is trading more than $4.00 off of last week’s average price. Sentiment has changed as the Cattle on Feed Report and demand expectations have overwhelmed tight near-term supply. 2024 futures contracts have also taken a beating and are trading at a discount to the cash market (as is the front contract) instead of the premium they previously had been trading. Many expectations were for beef cutouts to surge and head towards 325.00 or higher. Prices peaked at just above 309.00 and have fallen. Cutouts have failed to launch and have broken down below 300.00. Grocers and restaurants have seemingly taken control of the market as they are not aggressively pursuing beef products and have been able to keep prices where view them as value. Demand worries have surfaced. Reports are coming out about credit card delinquencies as young people have built up a heavy debt load and have started to struggle to pay the bill. This is how they pay for their needs and desires. If they can’t pay the vig, they won’t be using cards for expensive beef purchases. The upcoming Cattle on Feed Report is expected to show bigger feedlot supply which indicates supply could be plentiful into the springtime. The packer slaughter slowdown has finally increased supply enough to put feedlots over the edge and above last year’s numbers. A failure from settlement could see price test support at the rising 200-DMA now at 173.15. Support then comes in at the old all-time high at 172.75. If futures can hold settlement, a test of the 175.95 resistance level is possible. Resistance then comes in at 178.10.
Boxed beef cutouts were mixed as choice cutouts increased 1.04 to 300.46 and select decreased 2.00 to 267.42. The choice/ select spread widened and is at 33.04 and the load count was 138.
Friday’s estimated slaughter is 114,000, which is below last week’s 122,000 and last year’s 120,000. Saturday slaughter is expected to be 11,000, which is below last week’s 14,000 and last year’s 42,000. The estimated total for the week (so far) is 618,000, which is below last week’s 632,000 and last year’s 670,000.
The USDA report LM_Ct131 states: So far for Friday negotiated cash trading has been at a standstill in the Southern Plains. In Nebraska negotiated cash trading has been limited on light demand. In the Western Cornbelt negotiated cash trading has been mostly inactive on very light demand. Not enough purchases in any region for a market trend. The last reported market in all regions was on Thursday. In the Texas Panhandle live FOB purchases traded at 181.00. In Kansas live FOB purchases traded at 180.00. In Nebraska live FOB purchases traded at 181.50 and dressed delivered purchases traded at 287.00. In the Western Cornbelt live FOB purchases traded from 178.00-180.00 and dressed delivered purchases traded from 283.00-287.00.
The USDA is indicating cash trades for live cattle from 174.00 – 182.00 and from 276.00 – 290.00 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, November 14, 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
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