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June Lean Hogs made another new low for the down move, opening weak at the high of the day (98.25) and breaking down to the low of the day at 96.175. It drifted and then settled near the low at 96.50. The breakdown took price down below support at 97.30 and is a new low closing price for the down move putting bears in solid control of the price action, in my opinion. Traders seem disappointed in the cash markets, which are firming but, not at the pace traders would like to see. The gains have been sluggish and the futures market has seen its premium to cash whittle away across the spring and summer months. I think the cash markets will make a run higher and it could happen suddenly like it did in the cattle market. When it could happen is another story. But, if cattle cutouts continue its surge, you would think hog cutouts would follow along. This is grilling season and purchases will be made. Hog slaughter pulled lower at the end of the week. This could be the impetus for the cutout rise and change in sentiment if it continues. A failure from the low could send price down to test support at 95.30. If price can recover and get above 97.30, we could test resistance at 98.475.
The Pork Cutout Index increased and is at 101.13 as of 05/16/2024.
The Lean Hog Index increased and is at 92.13 as of 05/15/2024.
Estimated Slaughter for Friday is 468,000, which is above last week’s 462,000 and last year’s 461,157. Saturday slaughter is expected to be 36,000, which is above last week’s 9,000 and below last year’s 72,849. The estimated total for the week (so far) is 2,404,000, which is above last week’s 2,379,000 and below last year’s 2,407,025.
August Feeder Cattle opened higher, pulled back, making the session low at 257.175 and then rallied to the high at 260.125. It drifted and closed near the high at 259.85. The rally took price out of its trading range, taking out resistance at 257.925 and settling solidly above it. The rally took price above 260.00 and puts it in contention to challenge its April 29th high at 261.80. The cash index is moving higher but futures are trading at a stiff premium to the index and the May contract expires on May 23rd, putting August as both the lead and spot contract. May also rallied, settling at 246.725 which is also above the Friday index level, indicating expectations of cash continuing higher. August is still at a stiff premium to the May contract. A challenge of the recent high and a nominal increase in the index could eventually cause a snap back in the August contract. So be wary. If settlement holds, price could test resistance at 261.05. The April 29th high is next and with resistance nearby at 262.075. A failure from settlement could see price test support at 257.925. Support then comes in at the rising 21-DMA now at 255.525.
The Feeder Cattle Index increased and is at 243.04 as of 05/16/2024.
August Live Cattle is now the lead contract as its volume has surpassed the volume of the June contract. It opened higher and dipped to test support at the rising 8-DMA now at 177.175, making the low just above it at 177.275. Support held and price rallied the rest of the session to the high at 179.125. It settled near the high at 179.05. The rally saw price approach resistance at 179.40, stalling at the end of the day just below it. The cash market traded at 190.00 on Thursday, bolstering bullish traders who were able to push price higher. Cutouts have surged this week as packers individually but basically at the same time said they were cutting hours at plants due losses sustained and lower cattle numbers, in my opinion. I think they are slaughtering less because the numbers aren’t there to sustain high weekly slaughter. If they slaughter at their previous pace, they would likely run out of cattle…. Hence, they want to keep cattle in feedlots longer to keep gaining weight and keeping production at reasonable levels to drive cutouts higher and potentially catch producers and force cash prices down. Retailers in my opinion have been loading up on select beef cuts to fulfill ground beef needs and weren’t concentrating on the grilling season. With the announcement of the cut down hours, it may have lit a fuse for the retailers to get product bought or maybe it was just when they were ready to switch to the other cuts coincidentally. Either way cutouts have surged for choice and the choice/ select spread has widened. Producers weren’t caught and with the surge in choice cutouts were able to demand higher prices with live cattle trading as high at 191.00 and dressed reaching 302.00. Packers did slow slaughter this week but as one of my customers said … they are slowing it down because the cattle just aren’t there and they know it. The rising weights are so far benefitting all parties, in my opinion and weights could decline some as we move into the slaughter the calf feds. The cattle on feed report comes out next Friday and early predictions are for the on-feed number to be below last year and the packers are most likely aware of this possibility and are being proactive. The rise in cutouts will most likely allow packers to be aggressive in making purchases in spite of shorter hours. Producers see the rise in cutouts and with corn remaining cheap, aren’t afraid of losing control because they believe the numbers just aren’t there for packers to break the market, in my opinion. If price can hold settlement, it could test resistance at 179.40 and move towards resistance at 181.175. If price can’t hold settlement, it could pull back and test support at 178.10.
Boxed beef cutouts were higher as choice cutouts surged 3.30 to 313.45 and select increased 0.89 to 297.40. The choice/ select spread widened and is at 16.05 and the load count was 99.
Friday’s estimated slaughter is 102,000, which is below last week’s 120,000 and last year’s 122,392. Saturday slaughter is expected to be 9,000, which is below last week’s 13,000 and last year’s 16,205. The estimated slaughter for the week (so far) is 598,000, which is below last week’s 622,000 and last year’s 640,266.
The USDA report LM_Ct131 states: Thus far for Friday in the Texas Panhandle negotiated cash trade has been limited on light demand. There has been some early live FOB purchase at 186.00 however not enough trade for a market test. Last week live FOB purchases traded at 184.00. In Kansas Nebraska and the Western Cornbelt negotiated cash trade has been active on good demand. Compared to last week in Kansas live FOB purchases traded 2.00-3.00 higher at 186.00, with a few up to 190.00. Compared to last week In Nebraska live FOB purchases traded 3.00-4.00 higher at 190.00. Compared to last week dressed delivered purchases traded 2.00-3.00 higher from 298.00-300.00. Compared to last week in the Western Cornbelt live FOB purchases traded 3.00-5.00 higher at 190.00, with a few up to 191.00. Last week dressed delivered purchases at 295.00, with a few up to 296.00. **Correction to dressed grid heifers and cash dressed steers**
The USDA is indicating cash trades for live cattle from 184.00 – 191.00 and from 295.00 – 302.00 on a dressed basis (so far).
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, May 21, 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.
**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
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