Walsh Trading Daily Insights
Commentary
December Lean Hogs had a successful week for bulls, gap opening higher on Monday and continuing higher for the week before pausing on Friday. The rally saw 2 gaps on the chart as Monday’s low (79.75) was higher than the previous Friday’s high (77.20) and Thursday’s low (84.55) was higher than Wednesday’s high (84.00). The rally stalled at the declining 50 DMA on Thursday and Friday (now at 85.60). Thursday’s high at 85.675 was a new high for the move and Friday’s price action saw consolidation within the Thursday range. Settlement on Friday was at 85.175, which is under the 85.325 resistance level and the 50 DMA. Somewhat disappointing but the close was above the 8 WMA at 84.42, which is encouraging. There is hope for continued positive price action as cutouts and the cash index have stabilized with cutouts higher on the week and the Lean Hog Index bouncing after making lows earlier in the week. Export sales remain healthy and China was back in the market pleasing China watchers. Remember, China will be in the market when it suits them, they are not reliable customers and, in my opinion, should be looked at only as a bonus when they are in the market. Exports have been fine without there presence, in my opinion. If price can break through resistance at the 50 DMA, a test of resistance at 87.10 is possible. Resistance then comes in at 88.325. A failure from settlement could see a pullback in price. Support is at the gap from 84.55 to 84.00 and then 83.325.
The Pork Cutout Index increased and is at 112.33 as of 9/30/2021.
The Lean Hog Index down ticked and is at 92.90 as of 9/29/2021.
Estimated Slaughter for Friday is 475,000, which is above last week’s 472,000 and last year’s 467,000. Saturday’s slaughter is expected to be 163,000, which is below last week’s 237,000 and last year’s 214,000. The estimated total for the week (so far) is 2,524,000, which is below last week’s 2,578,000 and last year’s 2,612,000.
November Feeder Cattle consolidated within Thursday’s breakdown candle forming an inside candlestick. The range was from 154.325 down to the low at 152.65. It settled at 152.90. The high was just above resistance at 154.25 and the low just above support at 152.30. If price can hold settlement, a re-test of resistance at 154.25 is possible. If price can overtake the high, a test of resistance at 155.275 is possible. This is also the high of the breakdown candle so it is an important level in my opinion. A failure from the low could see price test support at 152.30 and then 151.55. Support then comes in at the rising 200 DMA now at 150.825.
The Feeder Cattle Index down ticked and is at 153.72 as of 9/30/2021.
December Live Cattle tried to rally, opening higher and getting above resistance at 126.625 to the session high at 126.70. It couldn’t hold there and traded lower the rest of the session, making a new low for the week at 125.00 and settling near the low at 125.20. A breakdown below the low could see the 124.30 support level and the rising 100 DMA (124.275) tested. Support then comes in at 122.825. If price can hold settlement, a test of resistance at 125.80 and then the Friday high is possible. Slaughter levels remain weak, keeping plenty of cattle in pens waiting to be processed and limiting the ability of producers to demand higher prices, in my opinion.
Boxed beef cutouts were lower as choice cutouts dropped 2.62 to 292.36 and select collapsed 4.48 to 264.84. The choice/ select spread widened to 27.52 and the load count was 114.
Friday’s estimated slaughter is 107,000, which is below last week’s 110,000 and last year’s 118,000. Saturday’s slaughter is expected to be 57,000, which is above last week’s 54,000 and below last year’s 70,000. The estimated total for the week (so far) is 637,000, which is below last week’s 641,000 and last year’s 664,000.
The USDA report LM_Ct131 states: Thus far for Friday negotiated cash trading has been limited on light demand in Nebraska and the Western Cornbelt with a few live purchases at 122.00, however not enough in either region for a full market trend. Negotiated cash trading has been at a standstill in the Southern Plains. The last reportable market in any region was on Wednesday. In the Texas Panhandle, live purchases traded at 124.00. In Kansas, live purchases traded from 121.00-124.00. In Nebraska, live and dressed purchases traded at 122.00 and 196.00, respectively. In the Western Cornbelt, live and dressed purchases traded from 122.00-123.00 and from 192.00-196.00, respectively.
The USDA is indicating cash trades for live cattle from 120.00 – 125.00 and from 188.00 – 198.00 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, October 7, 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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