Walsh Trading Daily Insights
Commentary
December Lean Hogs suffered its third day in a row of loss, erasing the gap open rally on the euphoria over Chinese participation in our export sales report. Traders expect that participation to be a one-off type of deal and took price back to the area it was before the report. Tuesday’s decline took price down to the 13 DMA at 75.00, making the low and settlement below it. The low came in at 74.875 and settlement was at 74.95. The high came in at the open at 76.40. The gap has been closed and broken through, and with settlement below moving average support, a weak open on Wednesday could lead to a test of the November 2 low at 74.075. Support is just above that low at 74.25. Support then comes in at 73.325. If price can retake the 13 DMA, Hogs could revisit resistance at 75.60. Resistance then comes in at 76.75.
The Pork Cutout Index increased and is at 96.60 as of 11/08/2021.
The Lean Hog Index increased and is at 79.29 as of 11/05/2021.
Estimated Slaughter for Tuesday is 478,000, which is below last week’s 479,000 and last year’s 491,000. Monday’s slaughter was revised lower to 467,000. The estimated slaughter for the week (so far) is 945,000, which is below last week’s 951,000 and last year’s 982,000.
January Feeder Cattle continues to consolidate at 160.625 resistance level, making the high just below it at 160.60 and trading down to the low at 158.65. It settled at 159.80. This area is congested with the 21 DMA at 159.175, the 100 DMA at 159.975 and the 50 just below at 158.85. It is making it difficult as traders are waiting for fundamentals to take a bullish turn before they can push price higher in my opinion. The cash index hasn’t been able to move higher, staying in a range between 154.00 and 156.00. If the index can give some indication of better pricing, we could see a break out higher in the futures. If not, we will continue to range trade in my opinion. Price must overcome the 100 DMA and then the 160.625 resistance level or risk pulling back to support yet again. If Feeders came overcome resistance at 160.625, a test of resistance at 162.00 is possible. A failure from the 50 DMA could see price revisit support at the 157.92 – 157.30 zone. Support then comes in at 156.075.
The Feeder Cattle Index increased and is at 154.86 as of 11/08/2021.
December Live Cattle faces a similar situation to the Feeder cattle. It has been consolidating in the upper end of its trading range as traders are happy to see the cash prices break 130.00, but they want more…. Cash Traded as high as 132.00 on Friday, according to the mandatory reporting system, but so far this week (and this is positive) we have seen just a few trades at 130.00 on Monday and Tuesday. Packers are hoping for a break down in futures to sour the producers resolve and producers are sitting back hoping for futures to rally and for packers to give in and pay their offering price which in some areas sit at 132.00 to 134.00. The Tuesday high was 132.375 and the low was at 131.40. Settlement was at 132.20. If price can over take the Monday high, we could see price test the August 24th high at 132.85 when the October contract was the lead contract, resistance is next door at 132.95. A failure from settlement could see price move towards support at 130.45.
Boxed beef cutouts were mixed as choice cutouts decreased 0.85 to 287.80 and select increased 2.02 to 270.62. The choice/ select spread narrowed to 17.18 and the load count was 200.
Tuesday’s estimated slaughter is 122,000, which even with last week and above last year’s 121,000. The estimated total for the week (so far) is 243,000, which is even with last week and above last year’s 239,000.
The USDA report LM_Ct131 states: So far for Tuesday in the Southern Plains negotiated cash trading has been at a standstill. In Nebraska and 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 from 128.00-130.00. Last week in Nebraska, live and dressed purchases traded at 130.00 and from 202.00-204.00, respectively. For the previous week in the Western Cornbelt, live and dressed purchases traded from 128.00-130.00 and from 202.00-204.00, respectively.
The USDA is indicating cash trades for live cattle 130.00 and at 204.00 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, November 11, 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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