The October Lean Hogs contract broke down below the August 5th low going limit down during the trading session. It settled limit down. Trade war escalation by China was the theme for the session. China’s Ministry of Finance said in statement that it would levy retaliatory tariffs on another $75BN in US goods with rates anywhere between 5 and 10%, with the tariffs set to be implemented in two batches, one at midnight on Sept 1 and another at midnight on Dec 15. Hogs closed below the 59.825 support level at 59.30This puts pressure on the market for the open on Monday. Continued weakness could see support tested at 58.25 and the 57.025. Any positive news over the weekend will only lead to consolidation within Friday’s range on Monday. The Lean Hog index fell to 77.04 as of 8/21/2019. The Pork Cutout Index declined to 83.19 as of 8/22/2019.
October Live Cattle also reacted negatively to the China retaliatory tariff announcement. It traded lower all session, breaking below support at 99.375 and making the low at 98.625. A recovery at the end of the day took price back above 99.375 as it settled at 99.40. If settlement holds on Monday, we could see price revisiting resistance at 100.275 and then 101.625. The cash market traded on a live basis at 106.00 in Texas and Kansas and at 108.00 in Nebraska. Boxed beef cutouts were lower with choice cutouts down 1.76 to 237.52 and select down 3.20 to 212.71 on light to moderate demand and offerings. The choice/ select spread widened to 24.81 and the load count was 77. Slaughter was 115,000. The total for the week stands at 577,000. Estimated slaughter for Saturday is 77,000. This will bring the weekly total to 654,000. This is slightly higher than expected. The continued high slaughter levels on Saturday show packers are interested in taking advantage of the high cutout prices and low cash. The cattle on feed report is out and shows on feed up 0.2%, placements down 2.1% and marketings up 6.9%. Placements are slightly bullish, in my opinion.
October Feeder Cattle crashed and went limit down during the session. The low was 130.975. It recovered off of the limit move and settled at 132.525. A recovery off of settlement could see price test resistance at 134.25 and then 135.60. Resistance then comes in at 136.75. A failure below settlement could see price test the Friday low. Support then comes in at 129.65. The Feeder Cattle Index rose to 139.72 as of August 22nd.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursday, August 22 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.
**Call me for a free consultation for a marketing plan regarding your livestock needs.**
Senior Market Strategist
Walsh Trading, Inc.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.