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February Lean Hogs opened higher and broke down to the session low at 83.675. It found support and rallied the rest of the session to the high at 86.00. It settled near the high at 85.925. With the cash market continuing to hold together with the indices working higher, traders bid the market up threatening the breakdown candle from December 16th. The high for the 16th is at 86.60 and could lead to a change in perspective if broken. The cutouts have been especially impressive with exports weakening as we end the year and see little buying for the new year so far. The US Dollar has been strong and may have put a crimp in our exports. This could continue as the Dollar continues to make new highs for its recent up move. So, like said earlier, this makes the cutout strength impressive. The Hogs and Pigs report and Cold Storage report comes out on Monday and this also could have played a part in the strong rebound in Hogs. Traders tend to cover some positions they have put on to protect themselves from an adverse report. With the breakdown we have seen in the Hogs, Traders who got short on the down move may have said get me out after the market failed to break down to a new low on the open. The expectation is still for the cash market to work lower in the near-term as supplies build and packers pull back due to the short weeks due to the holidays. But with the cutouts and cash firming this week, things may turn out differently than usual. We’ll see!… If price breaks down from settlement, it could test support at 85.325. Support then comes in at the rising 8-DMA now at 84.325. If price can hold settlement, it could test resistance at the December 16th high. Resistance then comes in at 87.10 and then the nearby flat 200-DMA now at 87.30.
The Pork Cutout Index increased and is at 95.36 as of 12/19/2024.
The Lean Hog Index ticked higher and is at 84.21 as of 12/18/2024.
Estimated Slaughter for Friday is 483,000, which is above last week’s 474,000 and last year’s 427,940. Saturday slaughter is expected to be 148,000, which is below last week’s 150,000 and above last year’s 69,444. The estimated slaughter for the week (so far) is 2,581,000, which is above last week’s 2,560,000 and last year’s 2,428,552.
January Feeder Cattle opened higher and broke down to the low at 253.90. The breakdown tested support at 254.30 and trendline support just below at 254.075, stopping just above the Thursday low at 253.80. With the Cattle on Feed report due after the close price saw some retracement in front of the report. The rally, however, wasn’t able to take out the Thursday high, reaching 256.125, which is just shy of Thursday’s high at 256.325. The price action therefore formed an inside candlestick. Futures continue to trade at a discount to the Feeder Cattle Index, indicating traders feel the index is due for a fall as we head into the expiration month. Soon March will overtake the January contract in volume and become the lead contract. It is also trading at a discount to the index as traders wonder if cash prices will falter in March when the cattle purchased to go on wheat start their migration to feedlots, in my opinion. We’ll see!… If price holds settlement, it could test resistance at the converging short-term moving averages with the 8-DMA at 256.90, the 13 -DMA at 256.625 and the 21-DMA at 256.775. Resistance then comes in at 257.925. A breakdown from settlement could see a re-test of support at 254.30.
The Feeder Cattle Index down ticked and is at 262.15 as of 12/19/2024.
February Live Cattle opened higher and traded down to the low at 186.275. This was a new low for the recent down move and just above trendline support at 186.05. The market reversed course and rallied the rest of the session to the high at 188.60. The rally took out the high from Thursday’s session(188.40)and settlement was at Thursday’s high. This formed a bullish Outside Day candlestick. The rally, even though impressive, is trading at a discount to the cash market as the North and the South seem to be diverging in direction. The North is seeing strength, and the South is drifting, creating a spread between the two major regions, forcing traders to put a discount on futures, especially the December contract, as no one wants to see deliveries in my opinion. The bullish price action comes in front of the Cattle on Feed report which was released after the close. The report came in within the analysts’ estimates so in my opinion neutral to the trade. Producers, however, have told me in our conversations after the report that they look at the report as bullish because placements were lower. They talk about it as continuing to show a shortage in supply which they expect to lead to higher prices as shown by the rising Feeder index as producers are aggressive in acquiring product, so they are not left out in the cold. Cutouts have been volatile this week as the Rib has been all over the place, taking a beating on Friday and pressuring the choice on Friday as a result of its breakdown to 596.04. It was above 650.00 at times this week. This could finally indicate the holiday buying is over with and continue to put pressure in the cutout into the beginning of the new year. This could hinder any further advancement for the cash market. We’ll see!… If price can’t hold settlement, it could consolidate within Friday’s range. If settlement holds, we could see price test resistance at the declining 8-DMA now at 189.70. Resistance is nearby at 190.075. Resistance then comes in at 192.70.
Boxed beef cutouts were mixed as choice cutouts fell 4.84 to 315.85 and select increased 1.80 to 285.91. The choice/ select spread narrowed and is 29.94 and the load count was 107.
Friday’s estimated slaughter is 115,000, which is below last week’s 117,000 and last year’s 120,900. Saturday slaughter is expected to be 5,000, which is below last week’s 12,000 and last year’s 23,089. The estimated total for the week(so far) is 609,000, which is below last week’s 614,000 and last year’s 647,172.
The USDA report LM_Ct131 states: So far for Friday in the Texas Panhandle and Kansas negotiated cash trading has been mostly inactive with very light demand. In the Texas Panhandle last week live FOB purchases traded from 191.00-192.00. Thus far for the week, in Kansas, live FOB purchases have traded steady at 191.00, with a light test. In Nebraska and the Western Cornbelt negotiated cash trading was slow on light to moderate demand. Thus far for the week, in Nebraska, live FOB purchases have traded steady to 0.50 higher from 195.00-195.50 and dressed delivered purchases have traded steady to 5.00 higher at 305.00, with a light test of both live and dressed noted. Thus far for the week, in the Western Cornbelt, live FOB purchases have traded steady to 2.00 higher from 195.00-196.00 and dressed delivered purchases traded steady to 3.00 higher at 305.00.
The USDA is indicating cash trades for live cattle from 191.00 – 196.00 and from 302.00 – 315.00 on a dressed basis (so far).
United States Cattle on Feed Down Slightly
Cattle and calves on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 12.0 million head on December 1, 2024. The inventory was slightly below December 1, 2023.
Placements in feedlots during November totaled 1.80 million head, 4 percent below 2023. Net placements were 1.74 million head. During November, placements of cattle and calves weighing less than 600 pounds were 495,000 head, 600-699 pounds were 420,000 head, 700-799 pounds were 375,000 head, 800-899 pounds were 276,000 head, 900-999 pounds were 145,000 head, and 1,000 pounds and greater were 85,000 head.
Marketings of fed cattle during November totaled 1.73 million head, 1 percent below 2023.
Other disappearance totaled 55,000 head during November, 2 percent above 2023.
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
bdicostanzo@walshtrading.com
www.walshtrading.com
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