Hogs continue to wait for a cash market low.

Livestock

Mixed trade was noted for the cattle complex. The lower AM beef report reigned in some hopes.

As of Tuesday afternoon wholesale beef had added 5.30 over 11 days. Today's morning report was -1.72. The US beef trade would like to see more consistent gains.

Last week's cash cattle trades averaged $171 in the South. That was up from the prior week's $170 average. This stopped eight weeks where cash dropped $15. Nebraska sold live at $171 and dressed at $270/$271. That was over the prior week's $168/$169 live and $267 dressed.

There are typically two or three market moving snow systems in the Plains in each winter. We would not suggest the recent system that dropped good amounts in South Dakota and Western Colorado, and lighter amounts for Eastern Colorado and Nebraska, would qualify as one. Given the general forecast for this winter, normal to above normal precipitation, there will be other chances.

Friday's monthly Cattle on Feed report would be called moderately negative. The prior May - October placements, six months, were +0.8% year/year. This helped ease supply concerns for 1st half 2024. But now we are filling out the summer to early fall supply period. Today's report showed November placements -1.9%. The trade expectation was -3.8% from one year ago (ALDL -3.1%). This helps determine a part of the July - October slaughter period. Marketings of finished cattle in November were counted -7.4%. The trade estimate was -6.7% (ALDL -5.5%). Feedlots do have some numbers in them. Remember, December 1 On Feed is what will be worked through in the coming months. USDA reported this count at +2.7%. The trade expectation was +2.2% (ALDL +2.4%). This is the highest Dec 1 total in three years.

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.

February fats officially remain in a downtrend from a general chart perspective. But the first immediate downtrend line has now been broken. The main downtrend line will be tested around 172. Though bears can note there is an open intraday gap waiting at that main price low, the 12/7 close of 162.52, we don't expect that to be filled. 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.

The feeder cattle chart looks a little better than fats. The short term downtrend line and the main one have been broken. Bears will note there are two open chart gaps at lower prices but we are unsure if they will get filled. They are the 12/13 close of 217.85 and the 12/7 close, 211.17. Bulls have a few upside chart gaps to discuss. 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: There is a change in belief recently. Employment is better than expected, the stock market is pushing to new highs, retail beef prices have not been hit as much as expected and we have a potential seasonal factor (higher). Let's reduce our expectations of a typical strong December rally to only the 50% retracement mark, 179.50 on the February live cattle contract. We would feel a lot better about this rally if wholesale beef can get on board. Please have a risk in place for all speculative trades...Rich Nelson

Trade Recommendation:

(12/26) Sell February live cattle 164 put 1.40, risk 2.80, objective 0.

Hogs

Hog futures rejected the majority of today's morning attempt at lower trade. Though bears are not seeing the market accept recent negative news with much enthusiasm bulls are also not seeing their hopes accepted.

The struggle for a clear seasonal low in cash hog prices continues. Losses were noted for trading Thursday and Friday, helping to push the Lean Hog Index to a new low for this downtrend. Tuesday's trade was +0.49.

Cash pork also continues to look for a seasonal low. Monday's AM pork report showed +1.69 for the composite carcass cutout. That was revised down to -0.09 for the day on the PM report. That PM report was only a small +0.77 over the current 12/21 low. Today's AM report was +1.05.

Quarterly Hogs & Pigs this afternoon was called negative. USDA reported December 1 All Hogs, both the marketing herd and breeding herd, at even with last year. The trade expectation was -0.5% (ALDL -0.6%). This is a light decline from the prior September 1 number at -0.3%.

Kept for Breeding as of December 1 were counted -3.3%. The trade estimated -1.2% (ALDL -1.3%). This is a decline from the prior September 1 pace of -1.2%. There is light breeding herd liquidation and an expectation for further light declines ahead. But we are not out of the woods here. Pigs per litter gains were quite large on the prior two quarters, +3.3% and +3.6% year/year. USDA posted the September - November ppl at +3.9%. The narrative for this report is light liquidation offset by increasing productivity.

Also out Friday afternoon, monthly Cold Storage was bearish for pork. USDA counted 416.1 million lbs. in the nation's freezers at the end of November. November is usually a big month of storage drawdowns for Thanksgiving. The five year average change is a 45 million lb. drawdown. This year's November drawdown was only 22. That is the smallest November drawdown in 10 years.

At the 12/7 recent installment of the AgLeaders Conference series we calculated hog and feed hedges applied at that time for 2024 production would result in -$23 per head losses. The recent H&P report would not suggest a supply change ahead in 2024 that would be enough to correct the general production profitability problem. 2023 will pencil out with -$26 per head.

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 general trend on the hog futures chart is down. But there is a clear major low posted on 11/28. After a quick rally from those lows this market is having trouble taking out the 50% retracement at 71.80 on the February. This marks resistance. Bears can also point out there is an open intraday gap at much lower prices still there, the 12/13 close at 66.72. We don't expect that gap to be filled but let's monitor it. In the short term we're expecting the open gap left from the 12/22 close of 71.35 to get filled. Directly from that area the February has significant 50% retracement resistance at 71.80. A break over the wall would open up the other four gaps. They are 75.05 from 11/20, 77.02 from 11/13, 78.60 from 9/28 and 80.90 from 9/20.

Summary: Though we are not happy about leaving an open gap at much lower prices we do agree with the idea futures, specifically 2024 futures have been undervalued. If we had firm lows posted for cash markets higher pricing for futures could be argued. Please use a risk order in place for all speculative trades...Rich Nelson

Working Trades:

(11/15) Sold February 66 hog put 1.90, risk 3.80, objective 0. Closed 1.05.

(11/30) Sold February 66 hog put 1.45, risk 3.80, objective 0. Closed 1.05.