Hogs End Week Strong Cattle wats for COF

Cattle & Beef - Brown Cow in Field(1)

June Lean Hogs opened lower and made the low at 102.25. It reversed course and rallied the rest of the session, making the high at the end of the day at 104.975. Settlement was near the high at 104.825. The rally took price past resistance at 104.35 and the 13-DMA now at 104.825. It settled right at the 13-DMA. Strong cash market expectations as we are in spring buying season propelled the market higher in my opinion. Exports and consumer demand have been strong, so even with slaughter numbers larger than expected, putting more pork production into the marketplace the cutout still looks like it wants to go higher. This will help drive cash prices higher as we should see a tapering off of  slaughter in the ensuing weeks. If price can hold settlement, we could test resistance at 106.85. Resistance then comes in at 107.925. A failure from support at 104.35 could see price test support at the rising 21-DMA now at 103.575. Support then comes in at 101.975. 

The Pork Cutout Index decreased and is at 100.73 as of 04/18/2024. 

The Lean Hog Index increased and is at 91.46 as of 04/17/2024.

Estimated Slaughter for Friday is 480,000, which is below last week’s 484,000 and above last year’s 463,781. Saturday slaughter is expected to be 67,000, which is below last week’s 89,000 and last year’s 84,680. The estimated total for the week (so far) is 2,487,000, which is above last week’s 2,485,000 and last year’s 2,452,612. 

August Feeder Cattle is now the lead contract as its volume has exceeded the volume of the May contract. It opened lower and traded both sides of unchanged, making the high at 254.95 and the low at 252.625, settling lower on the day at 253.50. The rally took price past resistance at 254.30 and the breakdown stopped shy of support at 252.35. The market chopped around waiting for the Cattle on Feed report that came out after the close. If futures fail from settlement, we could test support at 252.625. Support then comes in at 251.50. A rally past resistance could see price test resistance at 257.925.

The Feeder Cattle Index decreased and is at 241.73 as of 04/18/2024. 

June Live Cattle also consolidated in front of the report. It made the low at 174.575 and the high at 175.875. It was a choppy session with a strong end as it settled near the high at 175.675. The cash market was of no help to futures as trading was decent with prices steady to lower. Packers and producers seemed to be willing to await the Cattle on Feed report and then get busy. Slaughter in my opinion was better than expected so, I feel packers may need to be more aggressive in pursuing cattle. Cutouts continued to be weaker than expected, keeping producers on edge, in my opinion. It has not been able to rally as we are in the spring buying season, with choice cutouts under 300.00 and not looking like they are ready to rally as most of the action is in the select arena as lower cow slaughter has created more demand for leaner cuts to help make hamburgers as the beef 90’s are at record prices, and we are producing less select grade meat. The Cattle on Feed report came out after the close and in my opinion was bullish compared to expectations. Cattle supply is expected to decrease, and we can see lower placement numbers going forward, in my opinion. The rallies kept stalling below resistance at 175.95 and the breakdowns stayed above support at 174.425. These areas will key trade on Monday, in my opinion. A breakout above resistance could send price upwards to test the 100-DMA now at 177.75 and then resistance at 178.10. Resistance then comes in at 179.40. A breakdown below support could see price test support at 172.75. Support then comes in at 170.375.

Boxed beef cutouts were mixed as choice cutouts increased 0.13 to 295.67 and select increased 1.56 to 290.83. The choice/ select spread narrowed and is at 4.84 and the load count was 126.

Friday’s estimated slaughter is 113,000, which is above last week’s 109,000 and last year’s 108,586. Saturday’s slaughter is expected to be 20,000, which is above last week’s 12,000 and last year’s 11,786. The estimated slaughter for the week (so far) is 620,000, which is above last week’s 603,000 and below last year’s 625,370.

The USDA report LM_Ct131 states: Thus far for Friday in the Southern Plains and Nebraska negotiated cash trade and demand has been moderate. Compared to last week in the Southern Plains live FOB purchases traded steady at 182.00. Compared to last week in Nebraska live FOB purchases traded mostly 1.00 lower at 183.00. Compared to last week dressed delivered purchases traded 1.00 lower at 292.00. In the Western Cornbelt negotiated cash has been slow on light to moderate demand. Compared to last week live FOB purchases traded 1.00 lower at 184.00. Compared to last week dressed delivered purchases traded 1.00 lower at 292.00, on a light test. 

The USDA is indicating cash trades for live cattle from 180.00 – 184.00 and from 292.00 – 294.00 on a dressed basis (so far).

United States Cattle on Feed Up 1 Percent 

Cattle and calves on feedfor the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 11.8 million head on April 1, 2024. The inventory was 1 percent above April 1, 2023. The inventory included 7.27 million steers and steer calves, up 2 percent from the previous year. This group accounted for 61 percent of the total inventory. Heifers and heifer calves accounted for 4.56 million head, up 1 percent from 2023. 

Placements in feedlots during March totaled 1.75 million head, 12 percent below 2023. Net placements were 1.69 million head. During March, placements of cattle and calves weighing less than 600 pounds were 330,000 head, 600-699 pounds were 260,000 head, 700-799 pounds were 460,000 head, 800-899 pounds were 466,000 head, 900-999 pounds were 170,000 head, and 1,000 pounds and greater were 60,000 head. 

Marketings of fed cattle during March totaled 1.71 million head, 14 percent below 2023. 

Other disappearance totaled 57,000 head during March, 8 percent above 2023.

For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, April 23, 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.

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Ben DiCostanzo

Senior Market Strategist

Walsh Trading, Inc.

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