April Lean Hogs opened at the high of the day at 88.10, a tick above Friday’s settlement. It broke down the rest of the session to the low of the day at 86.15. It settled near the low at 86.275. The open and high was below resistance at 88.325 and the inability to take out resistance pressured price through support at 87.10 to the rising 13-DMA now at 86.20. Settlement was near the 13-DMA so this could key the price action on Tuesday. The rally in the futures on Friday to resistance put futures at a wide premium to the cash index. The index continues to move higher but at a slower rate than the futures were moving. This likely caused a snapback in the futures as nervous longs, seeing the strong resistance level and the richness to the index, liquidated some positions. This keeps futures in its consolidation band that started with the new high on February 22 at 88.90 and the February 26th low at 85.525. If futures can hold settlement, it could test resistance at 87.10. Resistance then comes in at 88.325 and then the Febraury22 high. A failure from the 13-DMA could see price test support at 75.325. Support then comes in at the rising 21-DMA now at 84.425.
The Pork Cutout Index increased and is at 91.64 as of 03/01/2024.
The Lean Hog Index increased and is at 80.26 as of 02/29/2024.
Estimated Slaughter for Monday is 493,000, which is above last week’s 492,000 and last year’s 465,702.
April Feeder Cattle opened unchanged and made the high at 258.225. The high was just above resistance at 257.725 and price gave way falling the rest of the session to the low at 255.45. Settlement was near the low at 255.75. The breakdown took price below support at the rising 8-DMA now at 256.50. Bulls need to see a reversal fairly quickly on Tuesday or we could see more pressure on the April contract. April is trading at a premium to the cash index and we need to see some impressive moves in the cash index to justify the strength in futures in my opinion. If futures can reclaim resistance at the 8-DMA we could revisit the Monday high. A failure below settlement could see support tested at 254.30 and then the rising 13-DMA now at 253.775.
The Feeder Cattle Index decreased and is at 246.38 as of 03/01/2024.
April Live Cattle opened lower and made the high at 188.95. This was just below the recent high at 189.20 and the inability to make a new high sent price lower the rest of the session. It made the low at 186.55 and settled near the low at 186.675. The breakdown took price below the key level at 187.725 and then the rising 8 and 13-DMAs (187.10 and 186.85 respectively). This also keeps the price action in its consolidation band. The high is at 189.20 and the low at 184.475 for the band. Traders, in my opinion were hoping cash prices would continue higher on Friday, looking for packers to make a new recent high at 186.00. It didn’t happen with cash trading on Friday from 182.00 to 184.00. So, they took some off the top and wait for the show list and guesses on what the packers would be willing to pay this week. The packers’ opening gambit was to slow the Monday slaughter to 116,000. They are willing to reduce numbers hoping for cutouts to move higher and producers to fatten cattle and give them more production with lighter slaughter numbers. Keep on leaving cattle in their pens hoping to get producers willing to sell cattle at the packers’ price. Producers aren’t faring well just like the packers and will resist this attempt. With corn cheap they feel they can hold out. Weights have stabilized since the wintry weather but are consistent with last year. It seems no matter what the packers are doing producers have been current and the fact packers want heavier weights, well, what weights would it take for producers to be considered not current and panic sell? We’ll see. Cutouts are grinding higher which in my opinion gives producers some ammunition to hold out for higher prices. Cash traded mostly steady last week. Slaughter was a little more than early expectations. The game continues…. If futures can reclaim resistance at the 8 and 13-DMAs, it could re-test resistance at 187.725. If futures fail from settlement, it could test support at the rising 21-DMA now at 186.20. Support then comes in at 185.75.
Boxed beef cutouts were mixed as choice cutouts increased 1.02 to 306.30 and select decreased 0.57 to 295.17. The choice/ select spread widened and is at 11.13 and the load count was 77.
Monday’s estimated slaughter is 116,000, which is below last week’s 122,000 and last year’s 124,667.
The USDA report LM_Ct131 states: Thus far for Monday in all trading regions negotiated cash trade has been at a standstill. Last week in the Southern Plains live FOB purchases traded at 183.00. Last week in Nebraska live FOB purchases from 183.00-184.50 with dressed delivered purchases at 290.00. Last week in the Western Cornbelt live FOB purchases traded from 183.00 -184.00, with dressed delivered purchases at 290.00.
The USDA is indicating no cash trades for live cattle and on a dressed basis (so far).
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, March 05, 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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