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February Lean Hogs opened lower and traded to the low of the day at 85.375. It turned higher and worked higher the rest of the session to the high at 87.575. It settled near the high at 87.325. The opening break saw price trade below support at the 13-DMA at 86.35, taking out the December 4th low at 85.50 to test support at 85.325, where it held and price grinded higher, taking out resistance at 87.10, the 8-DMA at 87.35, and the 200-DMA at 87.40. A down-tick at the close saw price settle below the moving average resistance levels. The initial breakdown gave hope to expectations that the extreme long positions in the Hogs were finally going to see some liquidation and see a breakdown to lower levels. But it wasn’t to be as bullish traders were able to get control of the price action and drive price higher into the middle of the consolidation band it is now trading in. The high is at 89.60, and the Friday low is the low of the band. A takeout of the high or the low could lead to a new directional move for the Hogs, in my opinion. I believe the longs will look to take some profits as we near the end of the 2024 trading year. The cash fundamentals have weakened over the course of the past few weeks as a rising Dollar had slowed exports and consumer demand was erratic in my opinion. But exports rebounded on this past report, and there is hope that ham will be on the Christmas menu, keeping cutouts from collapsing. But that is a problem that the hogs have faced as slaughter levels haven’t been as large as anticipated yet, cutouts have moved lower, and the cash hog trade has fallen during this cycle. You would think with numbers lower than expected and weights under control, we would see a strengthening cash market during this time. If the cash markets continue lower, it will create uncertainty in the futures market, and price could get pressured into the end of the year. We’ll see!… If price breaks down from settlement, it could re-test support at the rising 13-DMA. Support then comes in at 85.325. If price can hold settlement, it could test resistance at 88.325 and then 89.60.
The Pork Cutout Index up-ticked and is at 90.15 as of 12/05/2024.
The Lean Hog Index decreased and is at 83.93 as of 12/04/2024.
Estimated Slaughter for Friday is 480,000, which is above last week’s 433,000 and last year’s 476,888. Saturday’s slaughter is expected to be 185,000, which is below last week’s 383,000 and last year’s 248,542. The estimated slaughter for the week (so far) is 2,602,000, which is above last week’s 2,283,000 and below last year’s 2,667,752.
January Feeder Cattle opened higher and traded both sides of the open all session, making the high at 256.75 and the low at 255.375. Settlement came in at 255.825. The price action formed an inside candlestick, trading in the middle of Thursday’s big breakdown’s trading range. The price action also centered around the rising 13-DMA now at 256.025, with settlement below it. Traders seemed unwilling to kick Feeders into high gear with a strong Feeder Index, but they also didn’t feel inclined to retest the Thursday low and strong support at 254.30. With large, long positions in the market, it felt heavy, but it was able to stay afloat. Traders are still wondering what effect the New World Screwworm will have on the market as the supply is there but on the wrong side of the border. The USDA has said it would take about 3 weeks from the start of the notification of the screwworm to get the wheels moving and allow passage of cattle from Mexico into the US, but with the holidays coming up, many believe we won’t see movement until the start of the new year. We’ll see!… If price holds settlement, it could test resistance at 257.925. Resistance then comes in at the down-sloping trendline, now at 259.025. A breakdown from settlement could see a re-test of support at 254.30. Support then comes in at 252.30.
The Feeder Cattle Index increased and is at 261.83 as of 12/05/2024.
February Live Cattle opened higher and made the high at 187.00. It grinded lower the rest of the session to the low at 186.00. It settled near the low at 186.175. The breakdown to the low set a new low for the fledgling down move, moving below intermediate moving average support at the 21 and 50 DMAs, now at 186.575 and 186.775, respectively. The breakdown to the low stalled above support at 185.75, keeping bearish traders on their toes. The cash market continued to firm with the 5-area average probably higher than last week’s exceptional 189.97. Slaughter continued to disappoint as expectations were for a slaughter of at least 620,000, and the actual estimate for the week came in at 614,000. Cutouts firmed for the Choice cutout on Friday, while the Select was lower with a respectable load count. The lower slaughter and the upcoming holiday weeks could limit the upside for cash prices, especially if profit-taking in the futures market (after a strong run higher) continues to pressure futures. We are also seeing the USDA require testing of raw milk for bird flu as it says the virus has infected half of the dairy farms in California. Will this announcement create fear for the beef industry like it did in the spring? We’ll see!… If price can’t hold settlement, it could re-test support at 185.75. Support then comes in at 184.35. If settlement holds, we could see price test the intermediate moving average resistance and then move towards resistance at 187.725.
Boxed beef cutouts were mixed as choice cutouts surged 4.20 to 312.04 and select decreased 0.37 to 276.73. The choice/select spread widened and is at 35.31, and the load count was 125.
Friday’s estimated slaughter is 117,000, which is even with last week and below last year’s 121,821. Saturday slaughter is expected to be 12,000, which is below last week’s 47,000 and last year’s 12,419. The estimated total for the week (so far) is 614,000, which is above last week’s 536,000 and below last year’s 638,200.
The USDA report LM_Ct131 states: Thus far for Friday in the Texas Panhandle, negotiated cash trading and demand has been light. Compared to last week, live FOB purchases traded 1.00-3.00 higher at 191.00, on a light test. In Kansas, Nebraska, and Western Cornbelt, negotiated cash trading has been slow on light demand. In Kansas, compared to last week, live FOB purchases traded 1.00 higher at 191.00. In Nebraska, compared to the prior week, live FOB purchases traded steady to 1.00 higher from 191.00-192.00. Not enough dressed delivered purchases for a market trend. Last week dressed delivered traded at 295.00. In the Western Cornbelt, not enough purchases for a market trend. The last reported market was on Thursday, with live FOB mostly at 190.00 and dressed delivered purchases traded at 297.00.
The USDA is indicating cash trades for live cattle from 188.00–192.00 and from 295.00–306.00 on a dressed basis (so far).
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Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
Direct: 312.957.4163
888.391.7894
Fax: 312.256.0109
bdicostanzo@walshtrading.com
www.walshtrading.com
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
