Cattle post new downtrend lows with confidence.

Livestock

New lows for the general downtrend were reported. The needed move to fill the intraday gap at the 11/27 close was seen. The trade kept dropping after the gap fill. The close was near the low of the day. The general bear market remains in place.

Last week's cash cattle trade was $174/$175 in the South. The prior week was $177. Nebraska traded $174/$175 live last week, $176 the week before. Dressed sales were at $274/$275 last week. This was down from $278/$279 the prior week.

CME Group live cattle futures, with a normal basis applied, are suggesting Southern cash will fall to $167 later this month. Futures are suggesting a general sideways trade in the first half of the year $166 - $168. The peak of this year's pricing, back in June, was $185/$186.

The morning beef report's decline of -1.82 was widened to -2.74 on the afternoon update. Last week's beef trade was better than expected at -0.57.

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 generally 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 we did the needed job of filling that downside intraday gap from the 12/27 close today at 168.82. The problem is, after the downside gap fill the market kept falling. Additionally, the day's close was near the low. Bulls have plenty to discuss for upside IF a low can be posted. So far, that's not in the cards. You've got a minor upside intraday gap from the 11/22 close at 175.27. Two daily chart gaps are way up there at 184.70 - 184.90 then 186.65 - 187.52. Higher than that are two intraday gaps, the 10/18 close of 191.07 and the 10/2 close of 193.17.

Today's sale barn trade in Oklahoma City showed -7.70 vs. last week for nice 725# steers. In September they were +54% from last year. This week they are +23%. Calves were off -7.19 today. In November they were +59% from last year. They are currently +36%.

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. As with fats the January feeder filled the open downside gap, the 11/27 close at 212.80. After the gap fill the market kept falling. The day's close, near the low, is an additional bear point. Bulls would like to have a discussion about upside gaps on the chart. The daily 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: New lows for this general downtrend were noted again in fat and feeder futures. It would be valid to suggest the first part of this downtrend was made from revised views of first half 2024 beef production. Much of this second half is from concerns over demand via a recession. How much of this is the normal seasonal bear market in early December is a question. We would hesitate to suggest the seasonal of a bull market 12/9 to 1/1 with come with normal extreme strength. For now, bears remain firmly in control. We would expect that to remain this week. We'll see if the seasonal bottom shows up on time late this week/early next. As discussed before, it is the random extreme moves that clean out accounts. Please have a risk in place for all speculative trades...Rich Nelson

Trade Recommendation:

(11/27) Stand aside.

Hogs

Considering the general concerns over a recession, Prop 12 on January 1 and Chinese news this US lean hog futures market is doing okay. February has not broken the 50% retracement at 71.80 but it would be hard to suggest we should.

Last week's 2.704 million head US processing estimate was lightly revised down to 2.695 today. This is +4.3% from last year. It makes up for the lighter than expected +0.7% run over this year's Thanksgiving week vs. last year's Thanksgiving week. The general six week kill rate is +2.6% from last year. It should be only about +1%.

Cash hogs are still seeing pressure. Wednesday/Thursday/Friday  saw -0.75/-0.76/-0.61 daily losses. The Lean Hog Index, the measurement of cash hog prices for CME futures is now at 69.84. December lean hog futures, with 9 days left, are implying -1.79. That is a daily loss of only -0.21. We don't have a seasonal cash hog low for the year yet. Futures are suggesting it is nearing.

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.

Lean hog futures were able to rally enough to fill that daily chart gap last week, 71.40 - 71.57. It has not moved past the the 50% retracement mark at 71.80 though. Bears may want a second chance to trade down in the 68 - 70 range to verify is there is any volume waiting. A push past that 50% mark will open up a discussion of several upside gaps on the intraday chart. They are at the closes of 75.05 from 11/20, 78.60 from 9/28 and 80.90 from 9/20.

Summary: There is no positive news that we can hold onto and suggest the bear move is over. Seasonal pressure is still ahead for cash markets. The only argument is that futures are simply too low. February is holding a discount to last year's unnaturally low February. It is also a sharp -23% from the last normal February trade from 2022. We still estimate a $72 expiration for the December but that is not a high confidence claim. Please use a risk order in place if you are trading this market...Rich Nelson

Working Trades:

(11/15) Sold February 66 hog put 1.90, risk 3.80, objective 0. Closed 1.47.

(11/30) Sold February 66 hog put 1.45, risk 3.80, objective 0. Closed 1.47.