Walsh Trading Daily Insights Commentary
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In the December Lean Hogs market, prices opened higher and reached a new high for the uptrend at 85.075. However, the rally failed and prices broke down to the session low at 83.875. The market then consolidated and settled near the low at 84.075.
The excitement in the Hogs market continues to build as the cash market strengthens due to solid demand and lower than expected supply, in my opinion.
Exports surged on Thursday’s report, with a total of 44,800 MT sold. Mexico and China were the major buyers, securing 17,700 MT and 10,400 MT respectively.
Consumer demand remains stable, and I believe the cutout rally has been driven by the strong demand for belly, as belly stocks have been low. The one-day cutout on Friday concluded the week at its highest level (103.97), primarily due to significant gains in belly. This suggests a higher cutout index for the beginning of next week. However, the futures rally appears to be overbought, and Friday’s rally followed by a downturn created a Shooting Star candlestick formation, which could indicate a bearish trend. Monday’s trade may confirm this formation. It’s the second consecutive day with a strong start and a weak finish.In the livestock market, bulls appear to be growing anxious, potentially leading to panic if there’s a reversal in cash markets. The price could break down from settlement, testing support at 83.325, with further support at 81.70. Conversely, if the price holds at settlement, it might test resistance levels at 85.325, followed by 87.10, and the nearby rising 200-day moving average (200-DMA) at 87.225.
The Pork Cutout Index has seen an increase, standing at 101.46 as of October 31, 2024. The Lean Hog Index has also risen, reaching 87.93 as of October 30, 2024.
Looking at the estimated slaughter for Friday, it is expected to be 484,000, which is slightly below last week’s 485,000 but above last year’s 481,983. For Saturday, the slaughter is projected to be 219,000, higher than last week’s 156,000 but lower than last year’s 258,551. The estimated total for the week so far is 2,653,000, which is above last week’s 2,593,000 but below last year’s 2,665,081.
Walsh Trading Daily Insights Commentary
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I conduct a weekly livestock webinar every Tuesday. My upcoming webinar is scheduled for Tuesday, November 05, 2024, at 3:15 pm. It’s free and open for registration. The sign-up link is provided below.
Even if you can’t attend live, a recording will be emailed to you once the webinar is over. Sign Up Now.
In the December Lean Hogs market, prices opened higher and reached a new peak for the uptrend at 85.075. However, the rally faltered, leading to a decline to the session’s low at 83.875. The market then consolidated and closed near the low at 84.075.
The enthusiasm for Hogs is growing as the cash market strengthens due to robust demand and lower-than-expected supply, in my view.
Exports surged on the Thursday report, registering sales of 44,800 MT. Mexico and China were the leading buyers, with purchases of 17,700 MT and 10,400 MT respectively.
Consumer demand has remained stable, and the cutout rally appears to be driven by strong belly demand as belly stocks are currently low. The one-day cutout on Friday concluded the week at its highest level (103.97), with significant gains in the belly sector. This could result in a higher cutout index at the start of next week. However, the futures rally is showing signs of being overbought. Friday’s rally and subsequent downturn created a Shooting Star candlestick formation, which is often interpreted as a bearish signal. Monday’s trade may confirm this formation. It is worth noting that this marks the second consecutive day with a strong start and a weak finish.In the livestock market, there is a notable indication of bullish behavior potentially leading to panic in the event of a cash market downturn. If the price breaks down from the settlement, it may test support levels at 83.325, followed by 81.70. Conversely, if the price holds at the settlement level, it could face resistance at 85.325, then 87.10, and the rising 200-day moving average at 87.225.
The Pork Cutout Index has shown an increase, standing at 101.46 as of October 31, 2024. Similarly, the Lean Hog Index has risen to 87.93 as of October 30, 2024.
Looking at the slaughter estimates, Friday’s estimated slaughter is 484,000, which is slightly below last week’s 485,000 but above last year’s 481,983. For Saturday, the expected slaughter is 219,000, up from last week’s 156,000 but down from last year’s 258,551. The estimated total for the week so far is 2,653,000, which is above last week’s 2,593,000 but below last year’s 2,665,081.
January Feeder Cattle started lower and attempted a rally from the lower opening but it failed. Subsequently, it crashed and traded down to 239.50. However, when the futures price reached what I consider an extreme discount to the index, the breakdown stalled and traders pulled the price back towards the index. The price surged, surpassing the early high and racing to a session high of 243.90. From there, it pulled back and consolidated until the close, settling near the high at 243.20. The rally stalled just below resistance at the declining 8-DMA currently at 244.10. The breakdown took the price below support at 240.875 and the Thursday low at 239.875. This resulted in a Bullish Engulfing candlestick formation. Now we have two engulfing formations in play. One is a Bearish Engulfing candle formation that led to the breakdown, and now the bullish formation could see the price challenging the recent high. If the price holds at settlement, it could re-test resistance at the 8-DMA and then the nearby declining 13-DMA currently at 244.
As of 10/31/2024, the Feeder Cattle Index is at 250.98. December Live Cattle opened lower, made a high at 186.60, then broke down to a session low at 184.45. It bounced off the low but couldn’t reach the high again. Settling back and drifting into the close, it settled near the high at 185.925, creating a long shadow and a small bodied candlestick. This could give bulls hope for a rally if it can open strong on Monday. The rally took price just above the Thursday open, while the breakdown saw price stop just above support at 184.35. Cutouts ended the week on weakness and the cash trade is likely to be a little lower than last week’s average price. Resistance then comes in at 245.75. A breakdown from settlement could see a test of support at the rising 50-DMA now at 242.875 and then 242.475. Support then comes in at the rising 240.875.
The packer pulled back on slaughter due to resulting weakness in cutouts and a basically steady cash market. Slaughter was expected to be steady to a little higher than last week as the packer is believed to be in the black. However, the lower cutouts dented those plans. In November, we might see more weakness in the cutout as retailers prepare for the Thanksgiving holiday which usually features turkey and ham. A weakening cutout could lead to a pullback in cash, keeping the futures market on the defensive. Especially since we are near all-time highs. 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 resistance at the 13 and 21-DMAs, both at 187.
Hogs have made a new high, with resistance levels identified at 187.725 and 187.875. Beef cutouts have seen a decline, with choice cutouts falling by 1.26 to 316.34 and select cutouts by 0.34 to 285.03. The choice/select spread has narrowed to 31.31, and the load count stands at 95.
Friday’s estimated slaughter is 119,000, surpassing last week’s figure of 113,000 but falling short of last year’s 123,078. Saturday’s expected slaughter is 6,000, down from last week’s 19,000 and last year’s 13,028. The current week’s estimated total stands at 615,000, below last week’s 623,000 and last year’s 636,337.
According to the USDA report LM_Ct131, Friday’s negotiated cash trade in the Southern Plains, Nebraska, and the Western Cornbelt has been inactive due to very light demand. There have not been enough purchases in any region to establish a market trend.
The livestock market experienced significant changes this week. On Wednesday, the last fully established live FOB purchase market in certain regions closed at 190.00. In Nebraska and the Western Cornbelt, the last reported dressed delivered purchase market also occurred on Wednesday. Prices in Nebraska ranged from 296.00 to 298.00, while the Western Cornbelt stood at 298.00.
The USDA has indicated cash trades for live cattle, with live cattle prices ranging from 187.00 to 192.00 and dressed cattle prices from 296.00 to 304.00.
