February Lean Hogs opened higher and broke down to the low of the day at 69.475, consolidating in the upper end of Thursday’s limit up rally. It took price down to support at the 13-DMA now at 69.40. Traders were enthused that price couldn’t break through support and turned the price action around and Hogs rallied the rest of the session to the high at 71.975. It settled near the high at 71.90. The rally took price past resistance at the 71.325 – 71.85 levels but, couldn’t challenge 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. The end of the week rally took futures to the middle of the trading range, giving hope that the lows could be in but not changing the down trend it is currently in. Next week could be important if price can continue higher and lead to better expectations on the outlook past the holidays. Exports are looking good and pork prices are cheap in the grocery stores, in my opinion. If this doesn’t create more consumer demand, Hogs could be in trouble. We’ll see…. 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 rising 13-DMA. A continuation lower could see support tested at 68.75.
The Pork Cutout Index up ticked and is at 84.71 as of 12/14/2023.
The Lean Hog Index decreased and is at 67.75 as of 12/13/2023.
Estimated Slaughter for Friday is 478,000, which is below last week’s 479,000 and above last year’s 446,000. Saturday slaughter is expected to be 297,000, which is above last week’s 249,000 and last year’s 203,000. The estimated total for the week (so far) is 2,689,000, which is above last week’s 2,674,000 and last year’s 2,580,000.
March Feeder Cattle is now the lead contract as its volume has exceeded the volume of the January contract. It opened higher and broke down to the low of the day at 218.875. Bulls took over and price grinded higher and then sprinted higher at the end of the day to the high at 222.675 dipping into the close to settle at 222.175. The rally took price past resistance at 220.875 and then 222.225. It settled below resistance, so this in my opinion will key trade on the open on Monday. If Feeders can trade above the Friday high, we could see a test of resistance at 223.55 and 224.475. Resistance then comes in at 225.675. A failure below settlement, could see a test of now support at 220.875 and then 219.40. Support then comes in at 217.375.
The Feeder Cattle Index increased and is at 219.07 as of 12/14/2023.
February Live Cattle opened higher, traded lower and made the low at 166.925. It drifted most of the session and then caught a bid and surged at the end of the day to the high at 169.75. It settled near the high at 169.35. I think talk of cash trades as high as 170.00 spurred the rally as traders became hopeful that cattle could do better next week. The mandatory report confirmed trades at 170.00 so, with a good start to futures trading on Monday, maybe we could see the cash market start to recoup some of its recent decline as we near the Christmas Holiday. That would be a nice Santa present for producers. Slaughter is estimated at 649,00 this week as packers must be making money and looked to take advantage of that, in my opinion. This could improve producers’ chances of getting prices moving higher if this can continue into next week. The rally took price past resistance at 168.62 but couldn’t challenge resistance at the declining 21-DMA now at 170.275 and the nearby 170.375. Price needs to this strong resistance area in my opinion to get a better cash environment for next week. A rally past here could see resistance tested at 172.75. Resistance then comes in at 174.425. A breakdown below settlement could see price test support at 168.625. Support then comes in at 166.975.
Boxed beef cutouts were mixed as choice cutouts decreased 0.68 to 291.64 and select jumped 2.56 to 260.82. The choice/ select spread narrowed and is at 30.82 and the load count was 134.
Friday’s estimated slaughter is 121,000, which is below last week’s 122,000 and above last year’s 118,000. Saturday slaughter is expected to be 23,000, which is above last week’s 11,000 and last year’s 20,000. The estimated slaughter for the week is 649,000, which is above last week’s 635,000 and last year’s 622,000.
The USDA report LM_Ct131 states: Thus far for Friday in the Southern Plains negotiated cash trade has been slow on moderate demand. There have been a few early live FOB purchases at 170.00, however not enough purchases for a market trend. Last week in the Southern Plains live FOB purchases traded at 171.00. In Nebraska negotiated cash trade has been mostly inactive on light demand. The most recent market in Nebraska was Wednesday with live FOB purchases at 168.00 and delivered purchases traded from 267.00-268.00, a light test was noted. In the Western Cornbelt negotiated cash trade has been slow on light demand. There have been a few early live FOB purchases from 167.00-168.00 and a few dressed delivered purchases at 267.00, however not enough trade for a market trend. Last week in the Western Cornbelt live FOB purchases traded from 168.00-171.00, with dressed purchases from 268.00-270.00.
The USDA is indicating cash trades for live cattle from 165.00 – 170.00 and from 264.00 – 270.00 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, 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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