October Lean Hogs faced more hardship on Tuesday, breaking down as cutouts and cash continue to deteriorate. The market opened weak and after an early low, tried to bounce, trading to the session high at 81.225. This was just above resistance at the declining 13-DMA now at 80.975 as traders were hopeful for a strengthening cash. This was not to be as cutouts were lower at mid-day and bears pounced. Price broke down and made its low at 79.175. It drifted the rest of the day and settled near the low at 79.575. The inability of cutouts to rebound as beef cutouts firm is reigniting fears that demand will not be as hoped for the Labor Day holiday. With seasonal weakness in the cards, bulls were hoping for holiday buying to counter this tendency. With the cutouts heading lower, selling pressured price and the afternoon cutouts confirmed the weakness so bulls need something to latch onto or price will continue to fall, in my opinion. Settlement was below support at 79.80 so this keeps the pressure on the bulls. A failure below the low could lead to a test of the 78.80 support level. Support then comes in at 77.80. If Hogs hold settlement, it could test resistance at 79.80. Resistance then comes in at 80.45.
The Pork Cutout Index decreased and is at 106.98 as of 8/21/2023.
The Lean Hog Index decreased and is at 98.81 as of 8/18/2023.
Estimated Slaughter for Tuesday is 476,000, which is even with last week and below last year’s 482,000. Monday’s slaughter was revised lower to 471,000. The estimated slaughter for the week (so far) is 947,000, which is above last week’s 937,000 and below last year’s 964,000.
October Feeder Cattle is now the lead contract as its volume has exceeded the September contract. It opened lower and made its high at 253.125. It broke down in spite of weakening corn prices as the fat market was pressured all session. The breakdown took price to the low at 250.875 and settlement was near the low at 251.225. Settlement was below support at 251.30, so strength has to come early, or we could see a decline to support at the rising 21-DMA now at 249.35. A failure from here could see a test of support at 248.85. Retaking resistance at 251.30 could see price test resistance at 252.325. The Monday high is next at 253.20.
The Feeder Cattle Index decreased and is at 244.96 as of 8/21/2023.
October Live Cattle opened lower, made the high at 180.125 and broke down to the low of the day at 178.25. It consolidated the rest of the session and settled near the low at 178.625. Cash has been at a standstill so far and cutouts have remained firm. This is exactly what packers want. Weakening futures and strong cutouts. Weakening futures tends to cause producers to sell prematurely and with the heat in the mid-west reaching triple digits, producers are more willing to take what the packers offer. Exactly the packer game plan. After buying cattle early in the week last week, they now play the waiting game. Man, they have all the cards! The breakdown took price below support at 179.40 and the decline stalled just above the 178.10 support level. A failure below settlement could see the August 18th low at 177.625 revisited. The 50-DMA is just above it at 177.75. This is a critical area in my opinion. A failure from here strengthens the fledging downtrend. If settlement holds, we could test resistance at 179.40. There is strong short-term moving average resistance just above here with the 8-DMA (179.675), 13-DMA (180.55) and 21-DMA(180.425) all declining and adding to the pressure for producers.
Boxed beef cutouts were higher as choice cutouts increased 1.49 to 317.05 and select increased 2.18 to 289.51. The choice/ select spread narrowed and is at 27.54 and the load count was 96.
Tuesday’s estimated slaughter is 124,000, which is below last week’s 125,000 and last year’s 127,000. The estimated total for the week (so far) is 246,000, which is above last week’s 244,000 and below last week’s 250,000.
The USDA report LM_Ct131 states: So far for Tuesday in all trading regions negotiated cash trade has been at a standstill. The latest established market in all regions was last week. In the Texas Panhandle Live FOB purchases traded from 178.00-179.00. In Kansas Live FOB purchases traded at 179.00. In Nebraska Live FOB purchases traded from 185.00-188.00 and dressed Delivered purchases traded from 294.00-295.00. In the Western Cornbelt Live FOB purchases traded from 186.00-188.00 and dressed Delivered purchases traded from 290.00-295.00.
The USDA is indicating no cash trades for live cattle and on a dressed basis (so far).
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays (except holiday weeks) and our next webinar will be on Thursday, August 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.
**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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