Cattle feel more comfortable with stability for boxed beef.

Livestock

With recent strength in wholesale beef cattle futures found light support. The Northern Plains story is so far offset by this finishing weight situation. Though feeders did not make a new high for this month-long rebound it did post its best close.

Here's the weather impact on beef processing so far. Monday's 126,000 head cattle kill estimate from USDA was revised to 94,000. Tuesday's 104,000 estimate was revised to 84,000. Wednesday's 113,000 estimate was revised up to 116,000. Today's run was estimated close to normal at 120,000. Some of this week's processing shortfall will be made up on Saturday.

Today's weekly Actual Slaughter report detailed meat production statistics for the 12/26 - 12/30 Christmas week. Dressed steer weights lightly slipped in this week, -1 lb. from the prior week to 941. Dressed heifers were +1 lb. from the prior week to 849. This is a time of year when weights should falling. Compared with last year steers grew from +22 lbs. to now +26. Heifer weights expanded from +4 lbs. to now +10. Higher than last year weights added back 2.3% to beef production.

Beef export sales of 6,458 tonnes were reported for the first week of 2024. Year to date bookings are -16% from last year. USDA’s whole-year goal is -6%.

Cash cattle sales of $175 live and $272 - $275 dressed were noted in Nebraska. Last week this area saw mostly $174 with some $173's on a live basis. Dressed traded at $275. Three weeks ago they were at $169/$270.

Last week Texas traded few cattle. Prices were $172/$173. Kansas traded mostly $174 with some $173's. Three weeks ago both were at $170.

Wholesale beef over the past five days is +9.69. The thorn in the cattle market's side may be easing.

Allendale released estimates for next Friday's monthly Cattle on Feed report. As you know, May - October placements were a problem at +0.6% vs. prior year. That stopped the prior trend of clear year over year declines. We have the first half of 2024 beef supply set from those prior lightly higher placements. The trade is now wondering if/when the next change will be seen. Last month's report showed November placements -1.9% from last year. We estimate next week's report will show December at -2.5%. So we are not fully in the transition yet back to clear year over year declines. December inflows help determine a part of July - October fed cattle supplies. We expect marketings of finished cattle in December at +0.7%. With this in mind we see the prior December 1 count of all Cattle on Feed, +2.7%, declining lightly to +2.2%.

February Live Cattle Futures 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 directly behind us. The current low was made December 7. Given the extreme severity of the decline already seen we hesitate to suggest seasonals will be on target this year.

The February live cattle chart shows a light uptrend. There is still a gap open down to the 12/29 close, 168.50. That is still a reasonable short term target. We do not expect the much lower open gap, the 12/7 close at 162.52, to be filled. Bulls are slowly getting control of this market. They see a minor upside intraday gap from the 11/22 close at 175.27, 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.

The feeder cattle chart is in a light uptrend. Bears still have some valid short term arguments. There is the intraday gap at the 1/5 close at 224.15 then two others, the 12/13 close of 217.85 and the 12/7 close, 211.17. We would expect the first of those gaps to be filled. Bulls have a few upside chart gaps to discuss. They may feel a little better about discussing these due to recent positive trade. The daily chart shows one at 244.75 - 245.37. Intraday charts show unfilled closes from 11/22 at 230.12 and 10/18 at 253.60.

Summary: We would feel better about the bull argument if the first gap at lower prices was filled then a reversal. So far, we are still stuck within the recent range. We are general bulls and suggest prices “should” be able to recover 50% of the big downtrend, 179.50 on the February live cattle contract. But this struggling wholesale beef trade is a valid counterpoint for now. Please have a risk in place for all speculative trades...Rich Nelson

Working Trade:

(12/28) Sold February live cattle 164 put 1.45, risk 2.80, objective 0. Closed 0.27.

Hogs

Hog futures pushed to a new high for this rebound. Wholesale pork appears to be ready to call for a low before cash hogs. A clear processing delay will be seen with tomorrow's snows in the Eastern Cornbelt.

Due to weather Monday's 492,000 head hog kill estimate from USDA was revised down to 468,000. Tuesday's 395,000 estimate was revised to 374,000. Wednesday's 470,000 estimate was revised up to 477,000. Today, ahead of the Eastern Cornbelt's snows on Friday, was seen at 490,000.

Dressed barrow/gilt weights were +3 lbs. in this week to 216. Compared with last year there was no change. Hog weights are even with last year.

Pork export sales were reported at 17,808 tonnes for 2024. Year to date export sales are +226% vs. last year. USDA's whole-year goal is +1%.

Cash hogs were -0.34 on Wednesday. The 66.77 Lean Hog Index is lightly over the current 65.05 low.

Wholesale pork was +5.31 from the current low posted on 12/21 on Wednesday. Today's morning report was -2.47.

Within 5 days the market's interest will roll from the February to the April contract.

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.

The chart perspective for lean hog futures has changed. Today's close was the best since 11/20. Bulls are also correct in noting that we not only broke the downtrend line, we also filled the first upside gap and closed above it (12/22 close at 71.35). Remember, new lows for the general downtrend were posted just five days ago. Now we're at the best trade in 1 ½ months. Bulls still have many upside targets to discuss. They are the intraday gaps 75.05 from the 11/20 close, 77.02 from 11/13, 78.60 from 9/28 and 80.90 from 9/20.

Summary: The downtrend is broken. This is still not exactly a solid market for bulls but prices have returned back to “economic value”. Please use a risk order for all speculative trades...Rich Nelson

Working Trades:

(11/15) Sold February 66 hog put 1.90, risk 3.80, objective 0. Closed 0.27.

(11/30) Sold February 66 hog put 1.45, risk 3.80, objective 0. Closed 0.27.