February Lean Hogs opened unchanged and then broke down to the session low at 67.25. It reversed course and raced to an early high and then ranged for a couple hours before breaking higher and trading to the session high at 69.30. It settled near the high at 68.975. It formed an outside day candlestick, settling positive on the session so, a bullish potentiality. Settlement was above the key level at 68.75 so that is also a positive for futures. The recovery had the feel of a short-covering rally into the weekend and not necessarily a sea change in sentiment. The positive close and bullish candle aside faces a huge fundamental problem, in my opinion. The cash market has been suffering and producers have not been able to drive prices higher as there has been a lot more hogs ready to be slaughtered than implied by the last Hogs and Pigs Report. With weights high, production has overwhelmed demand, which has been good, in my opinion on the export side and stagnant on our consumer end. The positive for US consumers, is I have seen prices coming down for pork in groceries, which could cause Some consumers to turn to pork for their meat selection. Futures are also cheap compared to cash as Feb usually trades above the index and it is just under the index. So, we have some positives for hogs but, we need to see production start to come down to get some pricing power back to producers, in my opinion. If futures hold settlement, we could see a re-test of resistance at69.90. Resistance then comes in at the declining 21-DMA now at 70.475. If futures breakdown below 68.75, we could see a breakdown to re-test support at 67.80. A continuation lower could see support tested at 66.55.
The Pork Cutout Index down ticked and is at 83.87 as of 12/07/2023.
The Lean Hog Index decreased and is at 69.12 as of 12/06/2023.
Estimated Slaughter for Friday is 484,000, which is above last week’s 480,000 and last year’s 477,000. Saturday slaughter is expected to be 257,000, which is below last week’s 285,000 and above last year’s 145,000. The estimated total for the week (so far) is 2,687,000, which is below last week’s 2,695,000 and above last year’s 2,579,000.
January Feeder Cattle opened higher and rallied all session to the high at 216.575. It dipped at the end of the day to settle at 215.30. The low came in at 210.40. Feeders are now in a trading range (formed this week) with the high at 217.40 and the low at 209.15. In my opinion, this was a short-covering rally on Friday as we headed into the weekend. After the close the Feeder index came out at its lowest level since early June. The rally took price past resistance at 215.45 and 216.125. It settled below these levels. The keeps pressure on bulls. If futures can’t reclaim resistance, we can see a test of support at 214.55, 214.15 and then 213.20. Support then comes in at 212.15. If Feeders can trade above the Friday high, we could see a test of resistance at 217.375 and the Wednesday high. Resistance then comes in at 219.40.
The Feeder Cattle Index fell and is at 220.04 as of 12/07/2023.
February Live Cattle opened higher, made the low at 162.675 and rallied the rest of the session to the high at 166.325. It dipped at the end to settle at 165.725. Once again, in my opinion this was short-covering into the weekend after making a new low for the down move on Thursday. The cash market fell with the futures as packers were happy to back off their bids all week after making the cash high for the week on Monday. Friday saw the cash market trade in the lower end of the week range, with trades taking place from 166.00 to 169.00 on a live basis and making a new low on a dressed basis at 265.00. Not a good way to end the week for producers and puts packers in a position to try and take prices down some more next week. Cutouts continue to fall apart with choice down another 1.83 to 288.01. The rally took price past resistance at 162.725 and 164.90. Settlement was above 164.90 and ate up more than half of Wednesday’s break down candle. These are positive developments for the market. Price however couldn’t challenge resistance at 166.975 and the declining 8-DMA looms large just above at 167.675. Price needs a strong run higher on Monday to attempt to change the negative sentiment in the market, in my opinion. A breakdown below 164.90 could see price revisit support at 162.725. Support then comes in at 161.75.
Boxed beef cutouts were lower as choice cutouts fell 1.83 to 288.01 and select decreased 0.93 to 257.90. The choice/ select spread narrowed and is at 30.11 and the load count was 167.
Friday’s estimated slaughter is 122,000, which is even with last week and above last year’s 120,000. Saturday slaughter is expected to be 11,000, which is above last week’s 19,000 and below last year’s 24,000. The estimated slaughter for the week is 635,000, which is even with last week and below last year’s 648,000.
The USDA report LM_Ct131 states: Thus far for Friday in the Texas Panhandle, Nebraska and the Western Cornbelt negotiated cash trade has been limited on light demand. In Kansas negotiated cash trade has been at a standstill. The most recent live FOB purchases in the Southern Plains were Wednesday at 171.00. In Nebraska the most recent live FOB purchases were Wednesday from 170.00-171.00, mostly at 171.00, with dressed delivered purchases from 267.00-271.00. In the Western Cornbelt the most recent live FOB purchases were Wednesday from 169.00-171.00, with dressed purchases traded mostly at 270.00.
The USDA is indicating cash trades for live cattle from 166.00 – 172.00 and from 265.00 – 272.00 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 12, 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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