Walsh Trading Daily Insights
Commentary
April Lean Hogs staged a strong rally on Friday, holding support at 100.075 and rallying to the session high at 103.10. Settlement was at 102.725. All the rally did however, was take price back to the highs of the consolidation band it is trading in. April Hogs have consolidated between 103.575 and 99.825 since making the low at 98.475 on March 7. Price is still reacting to the head and shoulders top formation which was activated on March 4th on the trendline breakdown. The price objective for this pattern is down at 91.875. The cash index has been strong and has made a new high at 99.91. Futures are now trading slightly above the index instead of an extreme premium to the index. This has stalled the decline in the futures, in my opinion. Fundamentals are still strong in the cash market, in my opinion as hog supply is short and packers are aggressive in their pursuit of product. Rumors are starting however, that packers are trying to slow down the kill and are trimming Saturday slaughter to try to slow down the price advance in the cash market. Cutout prices have been receding and this could also put pressure on cash prices. Settlement was above the key level at 101.975 and this must hold in my opinion or we could see price fall back to support at 100.075. A failure from there could see price move lower to test the March 7th low. This low is right at the 98.475 support level. A breakout above the 103.575 consolidation high could take price up to the next resistance level at 104.35. The upward sloping head and shoulders trendline resistance is next at 105.00. There is a gap from the March 3rd low at 105.05 and the March 4th high at 104.25.
The Pork Cutout Index decreased and is at 105.53 as of 3/10/2022.
The Lean Hog Index increased and is at 99.91 as of 3/09/2022.
Estimated Slaughter for Friday is 476,000, which is above last week’s 470,000 and below last year’s 487,000. Saturday’s slaughter is expected to be 97,000, which is above last week’s 59,000 and below last year’s 135,000. The estimated total for the week is 2,475,000, which is above last week’s 2,419,000 and below last year’s 2,583,000.
April Feeder Cattle consolidated within Thursday’s trading range as corn stalled on Friday. Friday’s range was from 158.60 to 156.625, with settlement at 157.975. Traders seemed hopeful that corn may turn lower. Corn needs to turn lower and / or the fat market must rebound, in my opinion or Feeders are in trouble. With corn and wheat price in the stratosphere, potential profitability in the cattle markets is difficult at best. The Feeder cattle index has collapsed after making its 2022 high on February 11th at 163.16 as the realization has set in that high grain prices will linger much longer than hoped. If Feeders can rally past the Friday high, we could see a test of resistance at 160.625. Resistance then comes in at 162.00. A failure from settlement could see price re-test support at 157.30 and then the Friday low. Support then comes in at 156.075.
The Feeder Cattle Index declined and is at 155.37 as of 3/07/2022.
April Live Cattle also traded within its Friday trading range as bottom fishing took place in my opinion with the cash market stabilizing. Cash traded on Friday (so far) at 140.00 in a decent finish to the week. The Friday range was from a high at 137.70 and a low at 136.00. Settlement was near the high at 137.30. Settlement and the high was below the key level at 137.875. A breakdown from settlement could see price re-test support at 136.35. If price can hold settlement, we could see a test of resistance at 138.60.
Boxed beef cutouts increased as choice cutouts rose 0.77 to 254.71 and select jumped 1.74 to 249.11. The choice/ select spread narrowed and is at 5.60 and the load count was 97.
Friday’s estimated slaughter is 111,000, which is below last week’s 123,000 and last year’s 114,000. Saturday slaughter is expected to be 34,000, which is below last week’s 38,000 and last year’s 52,000. The estimated total for the week is 644,000, which is below last week’s 654,000 and last year’s 649,000.
The USDA report LM_Ct131 states: So far for Friday in the Southern Plains and Nebraska negotiated cash trading has been at a standstill. In the Western Cornbelt negotiated cash trading has been mostly inactive with very light demand. Not enough purchases for a market trend. In the Texas Panhandle Tuesday was the last reported market with live purchases at 138.00. In Kansas Wednesday was the last reported market with live purchases at 138.00. In Nebraska the last reported market was on Wednesday with live and dressed purchases trading at 138.00 and 220.00, respectively. In the Western Cornbelt the last reported market was on Wednesday with live purchases from 138.00-140.00 and dressed purchases from 219.00-222.00.
The USDA is indicating cash trades for live cattle from 136.00 – 140.00 and from 218.00 – 222.00 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, March 17, 2022 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
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Fax: 312.256.0109
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