The April Lean Hogs contract once again gap opened lower continuing its descent into the abyss, breaking down and plowing past support, going down the expanded limit, but settling above limit at 61.60. Limit levels go back to normal. Settlement was below the 61.60 support level and another weak open on Monday could see price get pressured and test support at 59.825. If price can hold settlement, consolidation within the Friday range is likely. Potential demand destruction in China because of the Coronavirus outbreak, the potential development of a vaccine for the African Swine Fever and continued huge production has laid waste to the Hog market in my opinion. The Lean Hog index increased and is at 62.78 as of 01/29/2019. The Pork Cutout Index fell and is at 74.45 as of 01/30/2019.
The April Live Cattle opened higher, trade past resistance at 120.70 to 121.125 for the session high then broke down and traded lower the rest of the session. It made the low at 119.575 and settled nearby at 119.675. A failure from settlement could see price test support at 119.15. Support then comes in at 117.80. If settlement holds a test of resistance at 120.70 and then 121.90. Cash trade on Friday was light on light to moderate demand in Nebraska and the Western Cornbelt. Compared to last week in Nebraska, dressed purchases traded 4.00 lower at 195.00. A few live purchases were reported at 122.00 in Nebraska however not enough for an adequate market test. Last week in Nebraska live purchases traded at 124.00. In the Western Cornbelt, compared to Thursday dressed purchases traded unevenly steady at 195.00. On Thursday live purchases traded from 122.00-123.00. Trade was limited on light to moderate demand in the Southern Plains however not enough purchases for an adequate market test. The latest established market in the Southern Plains was on Thursday with live purchases at 122.00. on a live basis. (From USDA report LM_CT131). Boxed Beef cutouts were lower on light demand and light offerings. Choice cutouts decreased 0.35 to 213.00 and select was down 0.82 to 210.66. The choice/ select spread widened to 2.34 and the load count was 74. Slaughter was estimated to be 122,000. Saturday slaughter is estimated to be 30,000. The week total is estimated at 637,000, lower than last weeks 647,000 and higher than last year’s 593,000.
March Feeder Cattle opened higher, made the session low at 135.45 and then rallied to the high early in the session at 137.775. The low is just below support at 135.60 and the high just above resistance at the declining 8 DMA at 137.575. It failed and traded to the 135.60 support level again, this time holding there and settling above it at 136.075. If settlement holds, price could test resistance at 136.75 and then the declining 8 DMA. Resistance then comes in at 138.95. A breakdown below settlement could see price test support at 134.25 and then 133.50. The Feeder Cattle Index declined and is at 142.38 as of 01/30/2020.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays and our next webinar will be on Thursday, February 6th 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.