Hogs Make New High, Cattle Markets End Week on Positive Note

December Lean Hogs opened lower, rallied to the high of the session at 77.025, and then broke down to the low at 75.775. It consolidated the rest of the session and settled at 76.15. The rally to the high negated the Tweezer Top formation and is a new high for the up move, but the price action stalled to the upside just below resistance at the flattening 50-DMA now at 77.15. The breakdown to the low stopped just above the key level at 75.60 and settlement was a tick below the key level at 76.175, creating a Doji candlestick. This indicates indecision in the market, after making the new high for the up move. This is also the second small bodied candle in a row after Wednesday’s breakout candle to the upside. This also creates uncertainty in my opinion as the market opened traded both sides of the open but settled right next to the open price (76.175). This could lead to a pullback if price is pressured on the open on Monday. The cash market looked like it was ready to move higher this week with the indices creeping higher. The cutout weakened the last couple days which could turn the index lower. The Lean Hog index also looks like it will be lower on Monday, keeping it near its lows. Slaughter levels were lower the past couple weeks from last year but this week it is showing a higher level. With weights up, production will be higher and this could put some pressure on price. The positives for the market are exports were very strong and the port strike has ended. If price breaks down from 75.60, it could test support at 74.25. A breakdown from here could see support at 72.80 tested. If price holds settlement, we could re-test resistance at the 50-DMA. Resistance is next at 77.80.

The Pork Cutout Index ticked higher and is at 95.55 as of 10/03/2024. 

The Lean Hog Index increased and is at 84.90 as of 10/02/2024.

Estimated Slaughter for Friday is 480,000, which is above last week’s 476,000 and last year’s 478,067. Saturday slaughter is expected to be 173,000, which is above last week’s 143,000 and last year’s 158,215. The estimated total for the week (so far) is 2,586,000, which is above last week’s  2,552,000 and last year’s 2,574,569.

November Feeder Cattle opened higher and rallied to an early high before pulling back and making the session low at 247.375. Price once again reversed and rallied the rest of the session to the high at 249.65. It settled near the high at 249.275. The rally took price past resistance at 248.875, settling above it but it was unable to challenge the flattening 100-DMA now at 250.225. The takedown to the low approached the rising 200-DMA now at 247.25. The Feeder index had been showing some strength this week but it came out down 1.47 after the close to 246.78. This could create concerns that the rally in the index is over. With the futures unable to overtake the last long-term resistance level, we could see some choppy trading between the 100 and 200 DMAs as traders debate whether the index is topping or not. A bullish feel would see futures try to keep building a premium to the index and a bearish feel could see traders take the premium away and build a discount to the index. If price holds settlement, it could test resistance at the 100-DMA. Resistance then comes in at 251.50. A breakdown below 248.875 could see a re-test of support at 200-DMA. Support then comes in at 245.75.

The Feeder Cattle Index decreased and is at 246.78 as of 10/03/2024. 

December Live Cattle opened higher, made an early high and then broke down to the session low at 186.10. It recovered and worked higher the rest of the session to the high at 187.35. It settled near the high at 187.00. The price action formed an inside candlestick as its price action was within the trading range of the previous day. Traders were enthusiastic this week taking price to a new high for the recent up move at 187.90, hoping to see strength in the cash market as early trades on Wednesday saw packers paying 186.00 on the fedcattleexchandge.com in Texas. But the price action didn’t explode higher and the volume was light. Hence, we consolidated in the futures on Friday indicating some concern from bullish traders. The trade to the high on Thursday also satisfied the Double Bottom breakout passing its measured move goal of 186.625. The cash average should be higher again this week which is encouraging for bulls but the trade was lackluster at best, even as cutouts has seemingly found a bottom and is moving higher. Exports were excellent for beef this week after a weak performance on last week’s report. Demand is holding up well, but there are worries that continued high prices for ground beef could finally put a dent in consumer demand. We’ll see!... If price can’t hold settlement, it could test support at 185.75. Support then comes in at 184.35. If settlement holds, we could see price re-test resistance at 187.725. Trendline resistance then comes in at 188.20.

Boxed beef cutouts were higher as choice cutouts jumped 2.78 to 302.58 and select surged 4.32 to 287.61. The choice/ select spread narrowed and is at 14.97 and the load count was 105.

Friday’s estimated slaughter is 108,000, which is below last week’s 116,000 and last year’s 111,017. Saturday slaughter is expected to be 12,000, which is above last week’s 9,000 and below last year’s 17,725. The estimated total for the week (so far) is 611,000, which is below last week’s 612,000 and last year’s 627,495.

The USDA report LM_Ct131 states:  Thus far for Friday in the Southern Plains negotiated cash has been moderate on trade and demand. Compared to last week in the Southern Plains live FOB purchases traded 1.00 higher at 186.00. In the Western Cornbelt and Nebraska negotiated cash trade has been slow on light demand. Not enough purchases in either region for an adequate market test. Last week in Nebraska live purchases traded mostly at 187.00 with dressed purchases at 294.00. For the previous week in the Western Cornbelt, live purchases traded from 186.00-187.00 with dressed purchases trading from 292.00-294.00 on a light test.

The USDA is indicating cash trades for live cattle from 185.00 – 188.50 and 295.00 – 300.00 on a dressed basis (so far). 

For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, October 08, 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.

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Ben DiCostanzo

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Walsh Trading, Inc.

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