October Lean Hogs opened lower at the key level at 77.80. This turned out to be the high of the day as price plummeted to the session low at 74.45. This was a limit down move and the price action came off the limit and was done by mid-morning as it drifted the rest of the session near the low to settle at 74.825. The limit move stopped the crash just above support at 74.25.The selling took place in spite of continued strength in the cash market as the cutout and cash indices continued its assent. Cutouts were strong again on Monday which will keep the index moving higher. This didn’t help futures as traders could be assuming the strength won’t last and took some profit taking after the big rally it had since making the low. In fact, the breakdown in the October contract took price to just below the 38% retracement of the 68.05 October low to the 78.70 high at 74.63 where it bounced to settle just above it. A failure from 74.25 could see price test support at 72.80. Support then comes in at 71.85. If price can hold settlement, it could test resistance at 75.60 and then 76.175.
The Pork Cutout Index increased and is at 104.77 as of 07/26/2024.
The Lean Hog Index increased and is at 91.85 as of 07/25/2024.
Estimated Slaughter for Monday is 482,000, which is above last week’s 453,000 and last year’s 477,242.
August Feeder Cattle opened higher and traded to the high at 260.55. Price had stalled just below the Friday high at 260.75 and then broke down the rest of the session to the low at 255.50. It bounced into the close to settle at 256.425. Traders took price down hard as they can’t seem to believe the cash market is strong and could possibly move higher. The index has been consolidating near all-time highs that it recently made and futures traders are keeping price right around the index, not letting any premium get built as it did during its prior bull run. Now it seems a small premium is enough to get a snap back that takes futures to a discount to the cash index. The breakdown keeps futures in its consolidation area with time running out on the August contract as the lead contract. We will soon be looking at the September contract as the lead contract and it is trading slightly below the August. Not a positive sign for sentiment into the fall. If price can’t hold settlement, we could test support at 254.30. Support then comes in at 252.35. If it holds settlement, it could test resistance at the down sloping trendline now at 257.375. Resistance is nearby at 257.925.
The Feeder Cattle Index ticked lower and is at 258.75 as of 07/26/2024.
October Live Cattle tested trendline resistance for the third day in a row and today it failed. It opened higher and made the high of the day at 188.975 which is just above the down sloping trendline at 188.90. The market pivoted and broke down the rest of the session to the low at 186.125. It settled near the low at 186.60. The breakdown took price below supportat 187.725, stopping just above the rising 8-DMa now 185.925. Traders used the failure to break above trendline resistance to take some profits after the nice rally it has had over the past couple of weeks. Traders are looking at the livestock markets and refusing to believe that the cash markets are strong and could continue higher. In the case of cattle, we have traders saying we have a lot of cattle in the feedlots yet supply is tight. Well, which is it? Lots of cattle in the feed lots or tight supply? They look at the packer cutting back on slaughter and saying prices are going to fall because slaughter is going down and weights are going up. Well, weights are up because packers are paying producers to put the weight on because supply is tight not there is lots of cattle in the feedlots. I have always been told packers don’t pay more than they have to and it seems they are paying higher prices because they have to in order to entice the producer to sell. Just because cutouts are not rising due to the reduced slaughter shouldn’t mean anything. Maybe they have lost control over both ends of their market. Consumers want beef but at their price or maybe a touch higher and retailers are steadfast in keeping price at bay. Producers have the ball and are running with it just like the packers do when they have the chance (which is more often than not). They say the packers were short bought so they had to pay up in the South and were able to keep prices near steady in the North. How could they be short bought with the lower slaughter? If they are consciously lowering slaughter, they can’t be short bought, can they? Well, if you look at the load counts at the lower prices… maybe they can….. They might have assumed too much and are now paying the “price”. Futures however, seem to think that packers will knock prices down and refuse to push price through the trendline(so far). We’ll see!… If price can hold settlement, it could test resistance at 187.725. If price can’t hold settlement, it could test support at 185.75. Support then comes in at 184.35.
Boxed beef cutouts were higher as choice cutouts increased 1.04 to 314.81 and select surged 4.06 to 301.52. The choice/ select spread narrowed and is at 13.28 and the load count was 145.
Monday’s estimated slaughter is 115,000, which is even with last week and below last year’s 121,098.
The USDA report LM_Ct131 states: Thus far for Monday in all trading regions negotiated cash trading has been at a standstill. Last week in the Southern Plains live FOB purchases at 190.00. Last week in Nebraska live FOB traded at 198.00 while dressed delivered purchases traded at 312.00. In the Western Cornbelt last week live FOB traded from 196.00-198.00 while dressed delivered purchases traded at 312.00.
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, July 30, 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
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.
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