December Lean Hogs opened lower, made the high of the day at 67.675 and broke down to the low of the day at 65.40. Price recovered to the middle of the range and then pulled back and settled at 66.00. The seasonal decline in cash hog and cutout prices has kept the pressure on futures. Large slaughter numbers and a seasonal decline in US consumer demand has kept the pressure on the cash markets despite good exports. There seems to be an endless supply of hogs to slaughter and packers have been able to get needed supply without being aggressive in their pursuit. This has put futures at an extreme discount to cash, but it hasn’t slowed the decline in futures. The breakdown took price below support at 66.55 with the low and settlement both below it. It keeps the bears in charge in my opinion and could set the stage for more downside next week. If Hogs take out the Friday low, a test of support at 64.80 is possible. A recovery bounce above resistance at 66.55 could lead to a test of resistance at 67.80. When will bears decide to book some profits?
The Pork Cutout Index decreased and is at 89.18 as of 10/19/2023.
The Lean Hog Index decreased and is at 80.45 as of 10/18/2023.
Estimated Slaughter for Friday is 479,000, which is below last week’s 480,000 and even with last year. Saturday slaughter is expected to be 207,000, which is above last week’s 187,000 and last year’s 147,000. The estimated slaughter for the week (so far) is 2,610,000, which is above last week’s 2,609,000 and last year’s 2,570,000.
January Feeder Cattle opened higher and made the high of the day at 246.425. The move came as corn opened the day session and down ticked. Feeders broke down as corn rallied to the high of the day and Feeders kept going lower despite corns reversal off the high to session lows by the end of the day. Price broke down below the Thursday low after failing to hold above the key level at 245.75 on the open and the bears were able to pressure futures and it gathered steam making the low at 242.65. The low was just above support at 242.475. Settlement was near the low at 243.05. I think the weakness lasted because of nervousness over the looming Cattle on Feed Report that came out after the close. A breakdown below the 242.475 support level could see support tested at 240.875. If price can hold settlement, we could move towards the Friday high.
The Feeder Cattle Index decreased and is at 243.99 as of 10/19/2023.
December Live Cattle opened higher and ticked to the high of the day at 186.025. It traded lower the rest of the session to the low at 184.425. It settled near the low at 184.625. The breakdown took price to the lower end of the larger trading range the December contract has been in. The range is from a high at 188.125 to the 184.25 low. The breakdown took price below support at the 50-DMA now at 184.725, but wasn’t able to take out the nearby 184.35 support level and the trading range low. I think the selling was related to the mounting fear of a bearish surprise in the Cattle on Feed Report. The cash market ignored all this as it has been strong compared to last week and Friday’s trades remained on solid ground. The Cattle on feed report out after the close showed the on-feed figure to be at 101% of last year, placements to be 106% and marketings 89%. I think this will be considered bearish but, will the Friday selloff be enough to satisfy the market? We might see a little follow through but with cash strong downside could be limited. A break down below the 184.35 support level could see support tested down at 182.575. A hold of the settlement price could see price revisit resistance at 185.75.
Boxed beef cutouts were higher as choice cutouts increased 1.26 to 305.38 and select increased 1.22 to 278.70. The choice/ select spread widened and is at 26.68 and the load count was 140.
Friday’s estimated slaughter is 118,000, which is above last week’s 112,000 and below last year’s 123,000. Saturday slaughter is expected to be 18,000, which is above last week’s 6,000 and below last year’s 42,000. The estimated total for the week (so far) is 638,000, which is above last week’s 617,000 and below last year’s 675,000.
The USDA report LM_Ct131 states: So far for Friday in the Southern Plains negotiated cash trading has been inactive with light demand. In Nebraska and Western Cornbelt negotiated cash trading has been limited on light demand. Not enough purchases in any region for a market trend. The last reported market was on Thursday in all regions. In the Texas Panhandle with live FOB purchases traded at 185.00. In Kansas live FOB purchases traded from 184.00-185.00. In Nebraska and the Western Cornbelt live FOB and dressed delivered purchases traded from 186.00-187.00 and at 294.00, respectively.
The USDA is indicating cash trades for live cattle from 182.00 – 188.00 and from 290.00 – 294.00 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, October 24, 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.
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Ben DiCostanzo
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Walsh Trading, Inc.
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