Cattle complex hopes for a December 9 seasonal low. AM beef was higher.

Livestock

A second day of rebounding from new downtrend lows on Thursday was noted. Traders are hoping, praying actually, that the December 9 seasonal low for futures holds true.

There was no adjustment to Friday's weekly cattle kill estimate of 635,000 head on today's daily update. This is too high at -2.1% from last year. Last week was -3.9%. The six weeks before that were -6.0%.

Wholesale beef is the wildcard. Last week's trade was terrible with a net loss of -9.45 for choice. That Friday trade was the lowest yet since the June high. Today's morning quote was positive at +2.44.

This week's live trade in the South was mostly $171 with a few $170's noted. This is -$14 from the higher in the first week of November. Nebraska sold at mostly $169 with a few $168's last week. This is -$16 from its peak November trade. Dressed sales of $270 were noted. That is -$24 from its peak in September.

Futures suggest Southern cash will fall to $166/$167 later this month.

USDA's monthly supply/demand report also holds meat tables. For beef they left their 26.932 billion lb. 2023 production estimate unchanged. This is -4.8% from last year. Their 2024 view was upped by 180 million to 25.990 billion. They are still calling for decline next year, but a more muted one of -3.5%. Allendale this week at the AgLeaders Conference update suggested 25.911, -3.8%.

February Live Cattle Seasonal: We monitor seasonal price trends but are not tied to them. The seasonal for fed cattle futures is a general long term rally to November 26 then a quick and very sharp price break to December 9. After that significant low there is a general rally into expiration. We will point out this year the peak was a bit early on September 19. If the seasonal would hold true then a major low would be in two weeks. Given the extreme severity of the decline already seen we hesitate to suggest seasonals will be on target this year.

February fats remain in a downtrend on the chart. Bears will point out there is still an intraday gap to the 12/7 close of 162.52 left to fill on the downside. It would be considered unfinished business. Near term resistance from our current downtrend line is at 167.92 for Tuesday. Bulls have plenty to discuss for upside IF a low can be posted. You've got a minor upside intraday gap from the 11/22 close at 175.2, two daily chart gaps way up there at 184.70 - 184.90 then 186.65 - 187.52 and two intraday gaps at even higher prices. They are at the 10/18 close of 191.07 and the 10/2 close of 193.17.

March Feeder Cattle Seasonal: We monitor seasonal price trends but are not tied to them. The 15 year seasonal average price trend for feeder futures is for a significant peak for the year on August 1 then a good moderate low on December 9. After that low we get about 50% of the big downtrend back with a rally to January 1. Then the bear move restarts and lasts into Q1. We did not mention in yesterday's comment on the seasonal that the May and August contracts are different. They hit that same December 9 low as January and March. The May rallies up to remove the entire downtrend and posts new highs to a peak on 2/19. Then it posts a clear downtrend to new lows into expiration. The August is really different. It posts a MAJOR low on 12/9, rallies to new contract highs to a peak on 2/19. Though it does see weakness into the month of May it does not make a new contract low. From May to August is posts a second strong rally until the year's seasonal peak for the year in the month of August. IF/WHEN we do hit a low in the coming days/weeks you want to be onboard the May or August contracts.

The feeder cattle chart still remains in a significant downtrend. There is an open downside intraday gap left from the 12/7 close on the January at 210.27. The near term downtrend line would suggest resistance on Tuesday at 218.32. If/when there is a low there are gaps at higher prices. The daily chart shows one at 242.37 - 242.65. Intraday charts show unfilled closes from 10/18 at 250.90 and contract high's 9/15 close at 268.32.

Summary: Friday's employment report was lightly positive. The trade also noted today's morning beef report was positive. That would fit into this December 9 seasonal low discussion. As end users are procuring beef a few weeks ahead we are now in the post-holiday low demand/paying bills seasonal slump. Normally, you get into mid-January procurement that starts this  week you get a good rebound. Given the large demand questions this seasonal rally is viewed with a little skepticism. Please have a risk in place for all speculative trades...Rich Nelson

Trade Recommendation:

(11/27) Stand aside.

Hogs

The hog futures trade today, posting an Outside Day closing lower, was disappointing. For the dominant February this is the second lowest close. Cash hogs have yet to stabilize, contrasting what current December futures believe.

Cash hogs were -1.01 on Friday. Last week's Lean Hog Index decline was -1.94. The LHI is now 67.93. The LHZ settlement today of 68.25 implies the trade believes cash hogs will rally 0.32 over the four days into Thursday's expiration of futures. That seems optimistic.

Cash pork last week was +2.12. Today's morning report was +1.83.

Last week's USDA hog kill estimate, 2.687 million head, was revised to 2.674 on today's update. This brings the kill down from +4.2% year/year to +3.7%. This is still a bit larger than expected.

USDA's monthly supply/demand report also holds meat tables. For pork they added a light 25 million lbs. to their 2023 production estimate. Now at 27.242 billion they have this year at a +0.9% increase over 2022. There was no change in their 2024 view at 27.730 billion. That estimate is +2.7% from 2023. This number is a bit controversial. There is light breeding herd liquidation but they suggest pigs/litter gains more than offset that. The coming 12/22 quarterly Hogs & Pigs report will clarify these numbers. By contrast Allendale's updated 2024 view, released in Thursday's AgLeaders Conference update, suggested +0.1% at 27.037.

Producers are still looking at a second year of hog production losses for 2024. Last week we calculated hog and feed hedges for the year would result in -$23 per head production losses

February Lean Hog Seasonal: We monitor seasonal price trends but are not tied to them. The seasonal for hog futures, not cash hogs, is for a rally from November 6 to November 25 then sharp break into December 17. That becomes the final major low. After a minor rally to January 5 then minor break to January 11 this contract then rallies into expiration. If you are looking at this year's price action our moderate October 25 to November 7 rally would be the first step. We would therefore be on the second step to major lows right now if this seasonal holds.

The general trend on the hog futures chart is down. The current major low was posted 11/28. Today's close was the second lowest yet. There are four separate intraday gaps on this chart at higher prices. They are at 70.80 from the 12/4 close, 75.05 from 11/20, 78.60 from 9/28 and 80.90 from 9/20. Bears remain in control.

Summary: We're not sure if December futures should be holding their optimism just yet. For the remaining contracts bulls don't have something solid to hold onto yet. The first short term positive news would come from some type of seasonal low established in the coming days. Past that the trade will look for hope in the coming 12/22 quarterly Hogs & Pigs report for signs of more serious liquidation or a letup in recent strong pigs/litter increases. Please use a risk order in place if you are trading this market from any direction...Rich Nelson

Working Trades:

(11/15) Sold February 66 hog put 1.90, risk 3.80, objective 0. Closed 2.62.

(11/30) Sold February 66 hog put 1.45, risk 3.80, objective 0. Closed 2.62.