Walsh Trading Daily Insights
Commentary
August Lean Hogs gap opened lower and crashed, going limit down making the low at 47.575 and settling at 48.125 down 3.200. The market was expecting fireworks from the Hogs and Pigs report and it didn’t disappoint. The Report showed All Hogs and Pigs at 105.2% of last Year, with expectations coming in at an average at 103.7%. Hogs kept for Breeding at 98.7% vs average estimates at 98.2%. Hogs kept for Market at 105.8% vs average estimates of 104.2%. The March-May pig crop was 101.4% vs average estimates of 98.7%. (See list below for more of the report.) It seems producers didn’t slam on the brakes as expected which will leave the market with a large supply to work through, in my opinion. The limit move tested support at 47.825 with the low below it but settlement above it. A continuation lower has support on Monday at 46.30 and then 43.05. Resistance is at 49.35, 50.475 and then 51.80. The Pork Cutout Index was unchanged and is at 64.93 as of June 25, 2020. The Lean Hog Index made a new low since the May 13 peak at 68.87 and is at 44.87 as of June 24, 2020. Estimated Slaughter for Friday is at 472,000. This is above last week’s slaughter of 457,000 and above last year’s slaughter at 453,000. With estimated Saturday slaughter at 323,000 vs. last week’s 290,000 and last year’s 60,000 slaughtered, levels are now consistently higher which is keeping cutout and cash prices suppressed but is starting to eliminate the slaughter deficit with last year, in my opinion. Slaughter for the week is estimated at 2,641,000, higher than last week’s 2,587,000 and well above last year’s 2,386,000. Total slaughter for the year so far is estimated at 62,294,000 vs 62,468,000 for the same period last year.
Hogs and Pigs Report:
August Feeder Cattle continued its consolidation within Tuesday’s trading range. Tuesday’s range was 135.375 high to 131.025 low. Volume remains light and the trading ranges are tight since Tuesday. Friday’s settlement was 132.60. Monday has support at 132.075, 131.10 and then 129.65. Resistance is at 133.50, 134.25, 135.60 and then 136.75. The Feeder Cattle Index increased and is at 129.82 as of 6/24/2020.
August Live Cattle is also consolidating within its Tuesday trading range. The Tuesday high was 98.125 and its low was 94.75. Price has drifted into the lower end of the Tuesday range with the low at 95.225 and settlement at 96.025. Volume is also low and the price ranges have tightened considerably the past two sessions. Support is at 94.30, the rising 50 DMA at 93.99, trendline support at 93.15 and then 92.15. Resistance is at the declining 100 DMA on the continuous chart at 97.61, 98.125, 99.375 and then 100.275. Boxed beef cutouts declined with choice cutouts down 1.09 to 207.17 and select decreased 1.08 to 198.85. The choice/ select spread narrowed to 8.32 and the load count was 135. Friday’s estimated slaughter is 119,000, even with last week’s slaughter, and below last year’s 121,000. The Saturday estimated slaughter is at 82,000, much higher than last week’s and last year’s 59,000. This is a positive step to eliminating the deficit in slaughter numbers as it puts slaughter for this week higher than last year’s slaughter. This week’s slaughter is estimated at 680,000, higher than last week’s 656,000 and last year’s 670,000. The USDA report LM_Ct131 states: So far for Friday in the Southern Plains negotiated cash trading has been at a standstill. The last reported market in the Southern Plains was on Thursday. In the Texas Panhandle live trades moved mostly from 93.00 to 95.00. In Kanas live trades moved at 97.00. Thus far for Friday in Nebraska and Western Cornbelt negotiated cash trading has been inactive with very light demand. Not enough trades for a market trend. In Nebraska the last reported live trade market was Thursday with trades at 95.00 and the last reported dressed market was on Wednesday with trades moved from 155.00 to 156.00. In the Western Cornbelt the last reported live trade market was on Tuesday with trades at 98.00. The last reported dressed trade market was on Wednesday with trades from 153.00 to 156.00. The only trade price showing on the report for Friday is at 95.00 on a live basis. Nothing showing for dressed so far. Week price range – Live – 93.00 to 100.50 and dressed from 152.00 to 156.00.
Trade Suggestion(s)
Risk/Reward
Futures N/A
Options N/A
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Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
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