Walsh Trading Daily Insights
Commentary
July Lean Hogs broke out to a new high on Tuesday reaching 120.40 and then matched it on Wednesday before breaking down to support at 117.20, making the low at the support level. Today’s price action saw consolidation within Wednesday’s trading range, making the high in the upper middle of the range at 119.15. Settlement was at 119.00. The price action for the past four days has led to the formation of a ledge, with the high at 120.40 and the low at 117.05. This also is basically between the 119.90 resistance level and the 117.20 support level. It will take a breakout above or below the ledge for the next directional move, in my opinion. A breakout above the high could see price test resistance at 122.275 and then 124.00. A failure from the 117.05 low could see support tested at 115.925 and then 114.675. The rising 21 DMA is nearby ay 114.09. This is a critical area for Hogs in my opinion. A failure below here could indicate a near term top for the market.
The Pork Cutout Index increased and is at 126.81 as of 6/02/2021.
The Lean Hog Index increased and is at 113.75 as of 6/01/2021.
Estimated Slaughter for Thursday is 470,000, which is below last week’s 481,000 and above last year’s slaughter of 440,000. The estimated weekly total (so far) is 1,301,000 which is below last week’s 1,931,000 and last year’s 1,690,000.
August Feeder Cattle collapsed on Tuesday, trading down to support at the 100 DMA at 145.09, making the low at 145.10. I have a key level nearby at 145.05. The JBS cyber-attack and strong corn were the culprits for the breakdown. The market surged off the low reaching 153.35 on Thursday. It settled at 152.95. The rally stopped just short of resistance at 153.50. This area is important in my opinion, as previous price action in this area failed and sent prices lower and the breakout above this level sent price to a new high at 158.725 before crashing below it to the 145.10 low. Corn is pulling back and traders like that and have supported Feeders the last two sessions. A rally past 153.50 could see resistance at 154.25 and 155.275 re-visited. Resistance then comes in at 156.075. A failure from settlement could see price test support at 152.30, 151.55 and then 149.975.
The Feeder Cattle Index increased and is at 136.65 as of 6/02/2021.
August Live Cattle collapsed on Tuesday due to the JBS shutdown due to the cyber-attack on their systems. It traded down to support at 114.65, making the low at 114.625. This also was a test of the 200 DMA on the continuous chart which was at 115.14 on Tuesday. Support held and price rocketed higher, trading up to 119.55 on Wednesday. This was a test of resistance at 119.375 and the 50 (11914) and 100 (119.91) DMAs and price was unable break through this area and Thursday’s session saw consolidation within the Wednesday range. It traded between 119.40 and 118.45 and settled near the low at 118.525. If price is able to trade past the 100 DMA which is now at 119.95, a test of resistance at 120.80. Resistance then comes in at 121.90 and 122.825. A failure below the Thursday low, could see price re-visit support at 117.825 and 116.55. Support then comes in at the 200 DMA, now at 115.23. JBS seems to have resolved its issues and slaughter is at a “normal” level for Thursday. Cutout prices remain strong and are at levels only seen during the pandemic last year.
Boxed beef cutouts increased as choice cutouts rose 0.39 to 340.55 and select increased 1.28 to 313.16. The choice/ select spread narrowed to 27.39 and the load count was 138.
Thursday’s estimated slaughter is 120,000, which is below last week’s 121,000 and above last year’s 116,000. The estimated weekly total (so far) is 321,000, which is below last week’s 478,000 and last year’s 453,000.
The USDA report LM_Ct131 states: So far for Thursday in Kansas, Nebraska and Western Cornbelt negotiated cash trading has been limited on light to moderate demand. In Kansas a few live purchases traded from 119.00-120.00. Not enough for a full market trend. Wednesday live traded at 120.00. In Nebraska live purchases traded steady with the last market on Wednesday at 120.00. Not enough dressed purchases for a trend, Wednesday dressed traded from 190.00-191.00. In the Western Cornbelt live purchases traded steady with Wednesday at 120.00. A few dressed purchases traded at 190.00, not enough for a full market trend. Wednesday dressed traded from 190.00-191.00. Thus far for Thursday in the Texas Panhandle negotiated cash trading has been at a standstill. Wednesday saw live purchases at 120.00.
The USDA is indicating cash trades this week for live cattle from 118.00 – 121.00 and dressed trades at 188.00 – 193.00 (so far).
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, June 10, 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.
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