Commentary
October Lean Hogs opened on weakness and made an early attempt to rally. It reached its high at 85.875 and then fell hard, trading down to the session low at 83.75. A recovery into the end of the session saw it settle in the middle of the range at 84.875. Selling pressure entered the market as outside weakness due to the downgrading of the Debt sent shivers into the marketplace. Cutouts are volatile with two days in a row of lower levels. Cash is staying the course as packers have continued to be aggressive in their purchases. Bears continue to look for weakness and are keeping Hogs at a steep discount to cash, but futures aren’t collapsing as the discount to cash, and the summer seasonal strength hasn’t dissipated as they are hoping. The high stopped just short of the declining 13-DMA now at 86.00 and the low was below support at the rising 8-DMA now at 84.425. Exports are out before the open and could have an effect on the session. If settlement holds, we could revisit resistance at 85.325 and then the 13-DMA. Strong resistance lies above at the 200-DMA, now at 86.825. A failure below the 8-DMA could see price revisit the low and then support at 83.325.
The Pork Cutout Index increased and is at 114.61 as of 8/01/2023.
The Lean Hog Index down ticked and is at 105.90 as of 7/31/2023.
Estimated Slaughter for Wednesday is 468,000, which is above last week’s 457,000 and last year’s 465,000. The estimated total for the week (so far) is 1,420,000, which is above last week’s 1,390,000 and last year’s 1,349,000.
September Feeder Cattle is now the lead contract as its volume has exceeded the August contract. With the new lead contract trading at higher levels than the August contract, a new all-time high for the lead contract was established on Tuesday at 252.325. Today’s price action traded within Tuesday’s trading range, with the high at 252.20 and the low at 249.10. It settled at 250.10. Price was hamstrung between a weakening cattle market and a weak corn market. It followed the lead of the cattle market, displaying weakness despite the corn. If settlement holds, we could test resistance at 251.30. A breakout above the Wednesday high could see price move into pivot resistance territory as past price action stops at the new all-time high. Resistance is at the monthly R1 at 253.38 and then the daily R2 at 253.65. A failure at settlement could see price test support at 248.85.
The Feeder Cattle Index increased and is at 244.88 as of 8/01/2023.
October Live Cattle was unable to take advantage of Tuesdays breakout from its consolidation. It pulled back, making the high at 181.90 and the low at 180.15. Settlement was near the low at 180.50. It formed an inside candlestick. The outside market fear, plus nervousness about the continued lack of trading in the cash market as cutout prices have taken another downturn pressured futures. The continued effort of packers to curtail slaughter and bring down cash prices and strengthen cutouts at the same time is wearing out traders as the small levels of actual cash trading has shown some weakness. Expectations seem to fall in line for packers to at least temporarily regain control of the cash market and get prices moving in their favor, in my opinion. With the Labor Day holiday looming, cutouts could recover as retailers buy for the last summer cookout and packers may not be able to get producers to sell at any price. It will be quite the battle as packers seem to love to hold back on purchases to the end of the week to try to scare producers. With limited supplies out there, have they curtailed slaughter enough to get weights moving higher and cause producers to get tired of feeding cattle. We’ll see…. Cutouts are still relatively high, and packers bought very little cattle last week. The end of the week could get interesting. If settlement holds, price could re-test resistance at 181.175. Resistance then comes in at 182.575. A failure below the low could see price test support at 179.40. Support then comes in at 178.10.
Boxed beef cutouts were lower as choice cutouts fell 2.92 to 303.18 and select dropped 2.13 to 277.47. The choice/ select spread narrowed and is at 25.71 and the load count was 134.
Wednesday’s estimated slaughter is 123,000, which is below last week’s 126,000 and last year’s 125,000. The estimated total for the week (so far) is 371,000, which is below last week’s 374,000 and last year’s 372,000.
The USDA report LM_Ct131 states: So far for Wednesday in the Southern Plains and Nebraska negotiated cash trading has been at a standstill. In the Western Cornbelt negotiated cash trading has been inactive on very light demand. Not enough purchases for a market trend. The latest established market was last week in all regions. In the Southern Plains Live FOB purchases traded from 178.00-179.00. In Nebraska Live FOB purchases traded at 186.00 and Dressed Delivered purchases traded from 292.00-295.00. In the Western Cornbelt Live FOB purchases traded from 185.00-188.00 and Dressed Delivered purchases traded from 292.00-295.00. Last week a light test of purchases was noted in all regions.
The USDA is indicating cash trades for live cattle from 183.00 – 186.00 and at 294.00 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 03, 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
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
tested support at the
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall not be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.