The December Live Cattle contract consolidated the Wednesday gains on Thursday, September 28, 2017. It traded slightly above the Wednesday high (115.325), reaching 115.375 just below the 200 DMA (115.525), but above the 100 DMA (114.725). It ended the session at 115.275. Trading above the 200 DMA could lead to a test of the September 22 high at 117.725. A failure from the 100 DMA could see price test support at the rising 8 DMA (113.85). The negotiated cash market was quiet. Packers are playing the waiting game trying to get producers to lower prices. The spread between what they are willing to pay and what producers are will to sell is wide. It looks like we won’t see who gives in until after the futures settle on Friday. Thursday afternoon boxed beef cutout values were higher on Choice and lower for Select on light to moderate demand and light offerings. Choice was up 1.11 to 196.41 and Select down 0.80 to 189.11 on 128 loads. The choice/ select spread widened to a plus 7.30. The estimated cattle slaughter for Thursday was reported at 118,000.
The November Feeder Cattle found support at the 8 DMA (154.425), trading down to the session low154.075, before spiking to the high at 155.375. It spent the remainder of the day consolidating between the low and 155.225, ending the session at 155.025. It is the second day in a row above the rising 8 DMA and this should be the pivotal level for Friday’s trading session. Staying above the 8 DMA could lead to a rally to resistance up at 156.025 and then the September 20 high at 157.30. Resistance then comes in at 159.975. A failure from the 8 DMA could see price test the rising 13 DMA now at 152.85. Support then comes in at 152.30.
The December Lean Hogs contract tested trendline resistance up at 60.025 on the open, reaching the session high at 59.90. It failed and traded down below the 8 (58.35) and 13 (58.90) DMAs making the low just above the 58.10 support level at 58.17. It ended the day above the 8 DMA at 58.40. Traders lightened some positions in front of the Quarterly Hogs and Pigs Report. Resistance is at the trendline and the 21 DMA (60.125). A break out above resistance could see price move towards resistance at 61.80. A failure from the 58.10 support level could lead to a test of support down at 56.15 and then towards 54.80 support. Here are the highlights from the Quarterly Hogs and Pigs report: United States Hog Inventory Up 2 Percent – United States inventory of all hogs and pigs on September 1, 2017 was 73.5 million head. This was up 2 percent from September 1, 2016, and up 3 percent from June 1, 2017. Breeding inventory, at 6.09 million head, was up 1 percent from last year, and up slightly from the previous quarter. Market hog inventory, at 67.5 million head, was up 3 percent from last year, and up 3 percent from last quarter. The June-August 2017 pig crop, at 33.0 million head, was up 2 percent from 2016. Sows farrowing during this period totaled 3.10 million head, up 2 percent from 2016. The sows farrowed during this quarter represented 51 percent of the breeding herd. The average pigs saved per litter was a record high of 10.65 for the June-August period, compared to 10.58 last year. Pigs saved per litter by size of operation ranged from 7.80 for operations with 1-99 hogs and pigs to 10.70 for operations with more than 5,000 hogs and pigs.
For those interested I hold a weekly livestock webinar on Friday, September 29 at 3:00pm. 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.
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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.