Walsh Trading Daily Insights
Commentary
June Lean Hogs opened higher and broke out to the session high and a new high for the up-move at 108.125. It settled nearby at 107.90. The high was just above resistance at 107.925 and settlement was just below it. China’s ASF continues to be continue to be front page news for the hog market. Despite their claims to the contrary, the African Swine Fever is taking a toll of their hog supply as continued outbreaks has killed more of the breeding herd than they have claimed. Reuters is saying the outbreaks which has occurred mainly in the Northern region, is renewing talk that it will also reach down into Southern China. China will likely continue import massive quantities of pork to feed their population. This, along with strong US domestic demand and a decline in the US pig population should keep cutout and cash prices strong, in my opinion. If price can push above the Wednesday high, a test of resistance at 109.85 is possible. Resistance then comes in at 111.675. A failure from settlement could see support tested at 106.85. Exports are reported before the Thursday open and should have an impact on the price action for the day.
The Pork Cutout Index increased and is at 109.20 as of 4/06/2021.
The Lean Hog Index increased and is at 100.34 as of 4/05/2021.
Estimated Slaughter for Wednesday is 494,000 which is above last week’s 492,000 and last year’s 473,000. Tuesday’s slaughter was revised lower to 482,000. The weekly estimated total (so far) is 1,301,000, which is below last week’s 1,465,000 and last year’s 1,431,000.
May Feeder Cattle opened lower and then rallied to the session high at 153.05. It reversed course and broke down to the session low at 151.525. This is right at the 151.55 support level. Bulls took over and pushed Feeders higher and it settled at 152.675. It settled above the key level at 152.30. If price can hold settlement, we could see a re-test of resistance at 153.50. Resistance then comes in at 154.25. A failure from 152.30 could see price re-test support at 151.55. Support then comes in at 149.975. The futures market seems to be expecting a surge in feeder cattle cash prices, but so far cash has been lagging futures markets and has been unable to catch a bid. If this continues, futures will converge towards cash. We need to see cash start a strong rally going forward like to hog and now fat cattle markets.
The Feeder Cattle Index increased and is at 139.98 as of 4/06/2021.
June Live Cattle opened higher and traded to an early high before pulling back and trading below the 124.30 support level to the session low at 123.95. Bulls came alive and bid price up the rest of the session to the high at 125.35. It settled at 125.275. Cash has broken free from its log-jam and traded as high as 123.75 on a live basis. Cutouts are surging and packers are being more aggressive in purchasing cattle. If cattle can hold settlement, a test of resistance at 125.80 is possible. Resistance then comes in at 126.625 and then the February 16 high at 126.70. A breakout above here could see price test resistance at 128.10. A failure from settlement could see price test support at 124.30 and then 122.825.
Boxed beef cutouts surged as choice cutouts soared 3.54 to 266.31 and select jumped 3.89 to 255.19. The choice/ select spread narrowed to 11.12 and the load count was 117.
Wednesday’s estimated slaughter is 120,000, which is above last week’s 119,000 and last year’s 101,000. The estimated weekly total (so far) is 345,000, which is below last week’s 358,000 and above last year’s 313,000.
The USDA report LM_Ct131 states: Thus far for Wednesday negotiated cash trading and demand have been moderate in the Southern Plains with live purchases 3.00 higher compared to last week at 120.00. In Nebraska, negotiated cash trading has been light on light to moderate demand with a few live purchases from 121.00- 123.00, however not enough live or dressed purchases in any one price range for a full market trend. Last week in Nebraska live and dressed purchases traded at 118.00 and 190.00 respectfully. In Colorado negotiated cash trading has been limited on light demand with a few live purchases from 120.00-123.00, however not enough for a full market trend. The last reported market in Colorado was two weeks ago with live purchases at 116.00. In the Western Cornbelt negotiated cash trading has been mostly inactive on light demand, not enough purchases for a full market trend. Last week in the Western Cornbelt live and dressed purchases traded from 118.00-120.00 and 188.00-190.00 respectfully.
The USDA is reporting live trades from 118.00 – 123.75 and dressed trades at 195.00 so far this 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, April 8, 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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