Commentary
April Lean Hogs opened higher made a weak attempt to rally, making the high near the open at 77.30 for the day. Resistance is at 77.80 and it has been containing April hogs keeping it in a trading range for the past week. After the failure to pressure resistance the market grinded lower, testing support at 76.175 repeatedly. The end of the session saw a break down through support and it also broke the 75.60 support level, making the low at 75.375. Settlement was weak at 75.50. If Hogs can hold settlement, a re-test of resistance at 76.175 and then 77.80 is possible. If futures can’t hold settlement, a test of support at 74.25 is possible. Support then comes in at 72.80 and then 71.825. There seems to be some worry that Chinese demand will decline and our hog supply is overwhelming. Some people believe that US demand couldn’t make up any Chinese shortfall in purchases. I am not one of them. US demand is strong and I think restaurant demand will grow as people will go out to eat if state governments get out of the way. Cold storage was bullish in my opinion indicating good demand. I believe China will continue to make plentiful purchases of pork going forward. The African swine fever is still present in that country and it has mutated due to suspected illegal vaccine proliferation. If the disease was declining, why would desperate farmers purchase vaccines from “black market” sources? German ASF issues continue to grow. The Philippine government has started to buy pork in an aggressive manner in an attempt to increase supplies to lower rising pork prices. Vietnam needs pork due to the disease. The disease continues to spread throughout the world. So, even if Chinese demand was to miraculously dry up, there are plenty of customers out there for our pork. The Chinese are important, yes but they are not the only game in town. In my opinion, our cutout prices and cash prices have been rising due to strong demand and packers wouldn’t be slaughtering so many hogs if they couldn’t make money on it.
The Pork Cutout Index increased and is at 82.38 as of 1/29/2021.
The Lean Hog Index increased and is at 67.40 as of 1/28/2021.
Estimated Slaughter for Monday is 483,000 which is below last week’s 486,000 and last year’s 491,000.
March Feeder Cattle opened higher, traded to the session high at 138.50 and then broke down testing support at 136.75, making the low just above it at 136.80. It consolidated the rest of the session and settled at 137.95. The high is just below resistance at 138.95. If settlement holds, we could see resistance re-tested at 138.95 and then 140.775. A failure from settlement could see price re-test support at 136.75 and then 135.60.
The Feeder Cattle Index increased and is at 136.43 as of 1/29/2021.
April Live Cattle opened higher, traded to the session low at 121.25 and then rallied to the session high at 122.375. It pulled back to settle at 121.70. Settlement was below support at 121.90 so in my opinion this will guide trade on Tuesday. If futures can hold settlement, a test of resistance at 122.825 is possible. A failure from settlement could see support tested at 120.80.
Boxed beef cutouts were unavailable as the USDA was experiencing technical difficulties as I write my article.
Monday’s estimated slaughter is 117,000, which is above last week’s 115,000 and below last year’s 120,000.
The USDA report LM_Ct131 states: The Afternoon report is delayed…. Here is the morning report CT130…
For Friday in the Texas Panhandle negotiated cash trading was slow on light demand. Compared to last week live purchases traded 2.00-3.00 higher at 113.00, with a few at 113.50. In Kansas negotiated cash trading was slow on moderate demand. Compared to last week live purchases traded 3.00 higher at 113.00. In the Southern Plains a light test was noted. For Friday in Nebraska and Western Cornbelt negotiated cash trading and demand were moderate. In Nebraska, when compared to last week, live purchases traded 3.00 higher from 112.00 to 113.00 and dressed purchases traded 5.00 higher at 178.00. In the Western Cornbelt live purchases, compared to Thursday, traded steady to 0.50 higher from 112.00-112.50. Compared to last week dressed purchases traded 5.00-8.00 higher at 178.00. For Friday in Colorado negotiated cash trading was moderate with light demand. Compared to last week live purchases traded 3.00-4.00 higher at 113.00.
The USDA is reporting trades for live cattle at 108.50 – 113.50 and 173.00 – 181.00 for dressed cattle so far for last week.
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, February 4, 2021 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.**
Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
Direct: 312.957.4163
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