Walsh Trading Daily Insights
Commentary
October Lean Hogs continued its descent, breaking down to and making the low at support at 83.325. The high was at 85.20. The range was established in the first half hour of trading as the market consolidated the rest of the day and settled at 83.875. Traders are anticipating an onslaught of hog production in the coming months which would take cutout prices and cash hog prices lower. Seasonally futures prices are usually lower at this juncture and they are pricing a return to some normalcy in market pricing going forward. This is with weights steady and slaughter volumes remaining low in the beginning of the usual seasonal pressure. Cutouts and cash prices remain strong even with the slight declines taking place, but with China prices dropping and continued worries about their potential departure from the export market traders are taking a bleak outlook for hogs going forward. And… don’t forget about the potential consequences of California’s proposition 12. Will California prices sky rocket while the rest of the country has to absorb pork that normally would go there? A failure from 83.325 could see support tested at 80.45. If price can hold support a test of resistance at 85.325 is possible. Resistance then comes in at 92.375.
The Pork Cutout Index decreased and is at 124.33 as of 8/09/2021.
The Lean Hog Index decreased and is at 111.21 as of 8/06/2021.
Estimated Slaughter for Tuesday is 478,000, which is above last week’s 469,000 and last year’s 456,000. The estimated total for the week (so far) is 934,000, which is above last week’s 877,000 and last year’s 914,000.
September Feeder Cattle continued its attack of resistance at 163.50. It made the high at 164.30 and the low at 162.45. Settlement however, was once again below it at 163.05. Feeders are still consolidating and the high of the range is now at 164.30, while the low is at 160.05. The constant back and forth will lead to an explosive move at some point. It needs to settle above resistance or below support at 160.625 to key the next directional trade, in my opinion. A pullback from settlement could see price re-visit support at 162.00 and then 160.625. Support is then at the rising 21 DMA, now at 160.37. If feeders can take out resistance at 163.50, a re-test of resistance at 165.775 is possible.
The Feeder Cattle Index ticked higher and is at 156.33 as of 8/09/2021.
October Live Cattle continues to spin its wheels around the key level at 128.10. It made the high at 129.20 and the low at 127.375. It settled at 128.125. Cattle has been consolidating since making the high at 129.875 back on July 27th. It made the low of the band just recently (August 6th) at 125.825, but for the most part has been buzzing around the 128.10 level. Cash prices also continue to stagnate, even though they are much higher at this time than last year. If price can hold settlement, a test of the high at 129.875 is possible. Resistance is next at 130.45. A breakdown from settlement could see price test support at 126.625. Support then comes in at 125.80.
Boxed beef cutouts were higher as choice cutouts surged 5.52 to 305.32 and select surged 3.80 to 284.61. The choice/ select spread widened to 20.71 and the load count was 128.
Tuesday’s estimated slaughter is 120,000, which is below last week’s 122,000 and above last year’s 118,000. Monday’s slaughter was revised lower to 113,000. The estimated total for the week (so far) is 233,000, which is below last week’s 238,000 and above last year’s 231,000.
The USDA report LM_Ct131 states: So far for Tuesday negotiated cash trading has been at a standstill in the Southern Plains and Nebraska. In the Western Cornbelt negotiated cash trading has been mostly inactive with light demand. Not enough purchases for a market trend. Last week in the Southern Plains live purchases traded at 121.00. For prior week in Nebraska live and dressed purchases traded at 125.00 and 198.00, respectively. For the previous week in the Western Cornbelt live and dressed purchases traded from 125.00-126.00 and at 198.00, respectively.
The USDA is indicating cash trades this week for live cattle at 124.00 – 125.00 and at 202.00 on a dressed basis (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, August 12, 2021 at3:00 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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