Walsh Trading Daily Insights
Commentary
July Lean Hogs continued its descent, trading down to 105.70 for the session low before bouncing and settling at 107.05. The low was below support at 106.85, which held as settlement was above this level. The high was at 109.675. A breakdown below the low could see support tested at 104.35 and then 101.975. A rally from settlement has resistance at 107.925 and then 109.85. The continuing collapse in China’s pork and hog prices are putting pressure on futures as traders fear this will lead to a collapse in US prices. China’s rapid expansion created this problem as the disease has not been eliminated and pigs that would still be getting fat are sold off early, in my opinion. China’s producers are selling hogs as soon as they are able as ASF is still working its way around China (in my opinion) and infecting pigs, so they dump them and are now faced with staggering losses. Could this lead to farms shutting down and when will another wave of ASF strike? Will this lead to another shortage of pork in China down the road? How will the Chinese government interventions in the market work and will it help or hinder price discovery?
The Pork Cutout Index decreased and is at 123.32 as of 6/18/2021.
The Lean Hog Index decreased and is at 120.43 as of 6/17/2021.
Estimated Slaughter for Monday is 468,000, which is below last week’s 474,000 and above last year’s 451,000.
August Feeder Cattle broke down below Friday’s low to test support at 153.50, making the low just above it at 153.60. The high came in at 156.375 and it settled at 155.10. Settlement was below resistance at 155.275. If price can bounce from 155.275, resistance could be tested at 156.075, and then the 157.30 to 157.92 area. A failure from settlement could see price re-test support at 154.25 and 153.50. A breakdown below 153.50 could pressure Feeders down to 152.30 and 151.55.
The Feeder Cattle Index increased and is at 144.58 as of 6/18/2021.
August Live Cattle broke down in another quiet session to the session low at 120.50. The high was at 121.95. Settlement was at 121.025. The low dipped below support at 120.80 and the high was just above resistance at 121.90. If price can hold settlement, a re-test of resistance at 121.90 and the 122.825 is possible. A breakdown from the low could see price test support at 119.375. Support then comes in at 117.825. Cash prices are firming and packers bought some dressed cattle at 195.00 to 200.00 on Monday. This is a positive for early in the week. Cutouts are in decline, but are still at extreme levels.
Boxed beef cutouts decreased as choice cutouts dropped 2.08 to 321.20 and select collapsed 2.15 to 281.46. The choice/ select spread widened to 39.74 and the load count was 90.
Monday’s estimated slaughter is 118,000, which is above last week’s 116,000 and last year’s 115,000.
The USDA report LM_Ct131 states: Thus far for Monday negotiated cash trading in the Western Cornbelt has been mostly inactive with very light demand. Not enough purchases for a market trend. In the Southern Plains and Nebraska negotiated cash trading has been at a standstill. Last week in the Southern Plains live purchases traded at 122.00. For the prior week in Nebraska and Western Cornbelt live and dressed purchases traded at 124.00 and 195.00, respectively.
The USDA is indicating no cash trades this week for live cattle and dressed trades at 195.00 – 200.00 (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 24, 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
888.391.7894
Fax: 312.256.0109
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