December Lean Hogs opened lower, rallied to the high of the session at 75.075, and then broke down to the low at 72.60. It settled at 73.375. The trade formed an outside day candle as its high and low overlapped the previous day’s range. The rally stopped shy of resistance at 75.60 and settlement was above support. Confusion reigns in the Hog market, in my opinion as the lower open on thoughts production as implied by the Hogs and Pigs report will ramp up as we move towards the 4th quarter were squashed by slaughter levels that are running below last year the past 2 weeks. It sent prices to the high and then the market cratered, taking out the early low on its way to test support at 72.80, which is just above the low. Traders are just unsure of production levels versus demand. Demand has to be better than expected in my opinion as stocks are not surging according to the cold storage report with the high slaughter levels last month. Cutouts were higher on Friday’s session, so that is supportive if it leads to stronger cash. Hence, there is some confusion, and we could consolidate until traders decide whether high production will overwhelm demand, or demand will keep supplies in check and lead to better prices for producers. If price breaks down from the low, it could test support at 71.825 – 71.325 band. If price holds settlement, we could test resistance at 74.25. Resistance is next at 75.60 and then 76.175.
The Pork Cutout Index ticked lower and is at 94.19 as of 09/26/2024.
The Lean Hog Index ticked higher and is at 84.07 as of 09/25/2024.
Estimated Slaughter for Friday is 475,000, which is above last week’s 475,000 and below last year’s 475,625. Saturday slaughter is expected to be 140,000, which is below last week’s 1555,000 and above last year’s 122,033. The estimated slaughter for the week (so far) is 2,506,000, which is below last week’s 2,565,000 and last year’s 2,546,648.
November Feeder Cattle is now the lead contract as its volume has overtaken the volume of the October contract. It opened unchanged, made the low at 244.60 and then surged to the session high at 247.00. It broke down from the high to settle at 245.70. Traders anticipated higher cash prices and took price to a new high for the up move as it drove past resistance at 245.75 and the 200-DMA on the continuous chart at 246.475. It couldn’t sustain the momentum, and the pullback saw it settle just below the key level at 245.75. The rally to the new high keep’s bulls in control of the price action but the shadow created from the pullback creates some uncertainty in my opinion. The Feeder index has made a new recent high as feedlots once again are getting aggressive and paying up to fill their feedlots, in my opinion. If price rallies past the 200-DMA, we could test resistance at 248.875. Resistance then comes in at the declining 100-DMA now at 250.625. A breakdown from settlement could see a test of support at the rising 8-DMA now at 244.175. Support then comes in at the declining 50- DMA now at 243.375.
The Feeder Cattle Index increased and is at 245.53 as of 09/26/2024.
December Live Cattle opened higher and broke down to an early low then raced higher to the session high at 185.60 in the first 15 minutes of trading. The market reversed course and traded lower the rest of the session to the low at 184.30. It settled near the low at 184.475. The rally took price near resistance at 185.75 and the breakdown took price down to test support at 184.35, with the low just below it and settlement just above support. The candle formed was a potentially bearish candle as it was a shooting star candle at the new high for the recent up move. There was enthusiasm early as the cash market was strong, and traders were hoping cutouts would also rebound. But the cutout was disappointing, and traders pressed cattle lower anticipating that cattle cash prices wouldn’t be able to sustain its strength going forward. The cold storage report showed beef stocks declining in the month of August when they normally increase, so this indicates that beef demand is still going strong and with the lower interest rates and election coming we could see demand remain on solid ground even if the packer has lost control of the cutout to the retail industry. The load counts have been strong retailers take advantage of the lower cutouts. The packer has outsmarted itself for the time being as their delays in buying enough cattle to meet their orders has led to a surge in the prices they pay to the producer. The question going forward is can this continue? Weights just set an all-time record which helps the packer with production and the cool weather will likely lead to more weight gains. We’ll see!... If price can’t hold settlement, it could test support at the rising 8-DMA now at 183.30. Support then comes in at 182.575. If settlement holds, we could see price re-test resistance at 185.75. Resistance then comes in at 187.725.
Boxed beef cutouts were mixed as choice cutouts increased 0.32 to 296.69 and select decreased 0.29 to 282.08. The choice/ select spread widened and is at 14.61 and the load count was 96.
Friday’s estimated slaughter is 116,000, which is above last week’s 108,000 and last year’s 95,581. Saturday slaughter is expected to be 9,000, which is even with last week and below last year’s 12,094. The estimated total for the week (so far) is 612,000, which is above last week’s 610,000 and last year’s 611,682.
The USDA report LM_Ct131 states: Thus far for Friday the Southern Plains negotiated cash has been at a standstill. In the Southern plains on Thursday live FOB purchases traded at 185.00. In Nebraska and the Western Cornbelt negotiated cash trade has been mostly inactive on light demand, however not enough trade for an updated market trend. On Thursday in Nebraska live FOB purchases traded from 186.00-187.00, while dressed delivered purchases traded from 292.00-294.00 mostly at 294.00. On Thursday live FOB purchases traded from 185.00-187.00, while dressed delivered purchases traded at 294.00, on a light test.
The USDA is indicating cash trades for live cattle from 184.00 – 188.00 and from 290.00 – 295.00 on a dressed basis (so far).
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