Walsh Trading Daily Insights
Commentary
February Lean Hogs continued its consolidation within last Tuesday’s breakout candle. It traded down and matched last Tuesday’s low at 65.775 and then bounced to settle at 66.50. This is just below the key level at 66.55. This will key trade for Tuesday in my opinion. A failure from settlement could see another re-test of last Tuesday’s low. If this doesn’t hold, we could see a breakdown to test support at 64.80 and then 63.325. A rally above 66.55 could see resistance tested at 67.80 and then 68.75. China announced it will auction 20,000 MT of frozen pork from its state reserves on Dec. 30. It also sold 20,000 MT of reserve pork last week in preparation for its Lunar New Year festivities.
The Pork Cutout Index hasn’t updated.
The Lean Hog Index hasn’t updated.
Estimated Slaughter for Monday is 490,000 which is above last week’s 487,000 and last year’s 485,000.
March Feeder Cattle opened lower, made the session low and rallied to a new high for the up move. It made the high at 143.70 and then worked its way lower before collapsing to test the low of the day and settle near the low at 142.60. The high is just above resistance at 143.50 and this proved too much for Feeders as corn worked its way higher causing traders to back off at resistance. It held support at 142.40 with the settlement price above it. If settlement holds resistance at the new high could be re-visited. Resistance then comes in at 144.25 and then 145.05. If support at 142.40 fails a breakdown to support at 140.775 is possible. Support then comes in at the 100 DMA (139.18) and then 138.95.
The Feeder Cattle Index dipped and is at 138.29 as of 12/25/2020.
February Live Cattle broke out and rallied to a new high at 116.30. It pulled back and settled at 115.775. Traders seem to think packers will be forced to pay up for cattle with a short week of purchasing for a normal slaughter schedule next week. Resistance at 116.55 and then 117.80. If settlement fails a test of support at 114.65 and then 113.90 is possible.
Boxed beef cutouts were mixed with choice cutouts up 0.28 to 207.82 and select down 1.28 to 196.65. The choice/ select spread widened to 11.17 and the load count was 160.
Monday’s estimated slaughter is 119,000, which is even with last week and last year.
The USDA report LM_Ct131 states: Thus far for Monday negotiated cash trading in the Western Cornbelt has been mostly inactive on very light demand. Negotiated cash trading has been at a standstill in all other major feeding regions. Not enough purchases in any region for a full market trend. Last week in the Southern Plains live purchases traded at 110.00. In Nebraska last week live purchases traded at 110.00 and dressed purchases traded at 172.00. Last week in the Western Cornbelt live purchases traded from 106.00- 110.00 and dressed purchases traded at 172.00.
Trade Suggestion(s)
Risk/Reward
Futures N/A
Options N/A
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays (except holiday weeks) and our next webinar will be on Thursday, December 31, 2020 at 1:00 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.
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Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
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