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April Lean Hogs opened higher and made the session low at 91.20. Price reversed course and rallied to the high at 92.725. It consolidated the rest of the session to settle at 92.15. The early breakdown stalled just a tick above the January 28th high and the high penetrated resistance at 92.375 but was unable to takeout the January 30th high at 92.75. Settlement was below resistance and the inability to sustain resistance reinforces this level as a strong resistance point, in my opinion. The session formed a small bodied candle indicating indecision in the price action at this key level. The cash market has strengthened with both the Lean Hog Index and Pork Cutout Index working higher as demand is strong and slaughter levels have been declining, indicating lower supplies of hogs. Exports exploded on the last report on Thursday, reaching 50,700 MT as Mexico bought 21,700 MT in front of expected tariffs, which were to start on February 1st. It will be interesting to see if sales are cancelled as the tariff implementation was delayed to March, if it occurs at all. The decline in slaughter is seasonal and also indicates that the USDA may have overstated supply in their last Hogs and Pigs report. With slaughter levels declining and expected to stay on the lower end compared to last year, the retail industry has been fairly aggressive in purchasing pork as it gears up for the later than usual Easter Holiday. Cash is anticipated to continue higher as evidenced by the strength in the expiring(2/14/2025) February contract which settled at 87.25, a little over 2 handles above the index. We’ll see!… A breakdown from settlement could see price test the Friday low and then possibly move towards support at the rising 8-DMA now at 90.60 and the nearby 90.40 support level. Hogs have a gap from the February 5th low at 89.975 to the February 4th high at 89.90. Support then comes in at the rising 13-DMA now at 89.80. A rally past resistance at 92.375 could re-test the January 30th high. A rally past here could see price move towards resistance at 93.50.
The Pork Cutout Index increased and is 94.47 as of 02/06/2025.
The Lean Hog Index increased and is at 85.05 as of 02/05/2025.
Estimated Slaughter for Friday is 489,000, which is above last week’s 480,000 and last year’s 481,690. Saturday slaughter is expected to be 102,000, which is below last week’s 156,000 and last year’s 182,965. The estimated total for the week (so far) is 2,536,000, which is below last week’s 2,569,000 and last year’s 2,623,899.
March Feeder Cattle drifted in the lower end of Thursday’s large breakdown candle trading above support at the rising 50-DMA now at 264.50 and the key level at 264.675. The Friday range was small, with the high at 266.15 and the low at 264.45. Settlement was near the low at 264.90. Friday’s low was the second day in a row of testing these two strong support levels that was successful in slowing down the decline in the future’s price. The session formed a weak Bullish Harami candlestick pattern which could lead to a retracement higher if support holds once again. This potential retracement could provide bearish traders with an opportunity as the weekly chart put in a bearish formation called an Evening Star Candlestick pattern. A retracement to the middle to upper middle of the week’s breakdown is possible, in my opinion. The Feeder Cattle index (see below) has broken down after peaking at its all-time high price at 281.68, following the future’s downward progression. A breakdown from settlement could see price retest support at the key level and the rising 50-DMA. Support then comes in at 262.075. A rally pat the Friday high could take price higher and test resistance at 266.975 and then 267.775. We’ll see!…
The Feeder Cattle Index fell and is at 275.59 as of 02/06/2025.
April Live Cattle traded in the lower end of Thursday’s breakdown candle in a quiet session to end the week at the low end of its recent trading range. Friday’s range was 197.70 for the high and 196.30 for the low. Settlement was near the low at 196.775. Price traded around support at 196.625 with it holding with settlement just above it. The breakdown in the futures took cash cattle prices lower as the week progressed. Last week saw cash prices make a new all-time high average price at 209.57 and the weakness in futures pressured cash prices this week. Last week’s high could be the near-term top in the cash market as we could be heading into a seasonal down-turn with packers cutting back on slaughter and the cutout price falling and expected to drop some more, in my opinion. Consumer demand usually weakens, and packers announce cooler cleanings and what not to justify slaughter cutbacks and a backing off in their pricing of cattle for purchase, in my opinion. We have a late Easter holiday, and this could also affect beef demand from consumers and therefore the retailer pursuit of beef further limiting the cutout price. The decline in futures prices this week gives the packing industry hope that they will regain control of the cash market as fund long positions are coming under pressure after taking record positions in the cattle markets, in my opinion. The weekly chart put in an Evening Star candle pattern after making an all-time high in the lead contract based on volume. It also tested support at the rising 8-WMA at 196.375 as it held with settlement just above it. We could see a retracement if price can hold this level as we established a Bullish Harami on the daily chart on Friday. This could provide bearish traders with an opportunity if a rally to resistance occurs. Watch for stops if support fails next week. We’ll see!… If price can’t hold support, a breakdown could lead to a test of support at the rising50-DMA now at 194.125 and the nearby key level at 193.95. Support then comes in at 193.225 and then 192.70. If price can overcome the Friday high, we could see price test resistance at 199.10. Resistance then comes in at 200.90.
Boxed beef cutouts were lower as choice cutouts fell 2.11 to 321.87 and select decreased 1.87 to 312.90. The choice/ select spread narrowed and is at 8.97 and the load count was 155.
Friday’s estimated slaughter is 100,000, which is below last week’s 114,000 and last year’s 116,407. Saturday slaughter is expected to be 8,000, which is above last week’s 2,000 and last year’s 3,967. The estimated total for the week(so far) is 584,000, which is below last week’s 600,000 and last year’s 617,013.
The USDA report LM_Ct131 states: So far for Friday, negotiated cash trade has been mostly inactive on very light demand in all regions. The last reported market in all regions was Thursday. In the Southern Plains, live FOB purchases traded at 206.00. In Nebraska, live FOB and dressed delivered purchases traded at 208.00 and 328.00, respectively. In the Western Cornbelt, live FOB purchases traded from 205.00-208.00 and dressed delivered traded at 328.00.
The USDA is indicating cash trades for live cattle from 203.00 – 209.00 and from 320.00 – 333.00 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
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