Walsh Trading Daily Insights
Commentary
June Lean Hogs opened higher and traded to the session high at 122.50. The rally peaked just a touch above resistance at 122.275, with selling taking over and driving price lower to close the gap at the session low at 120.225. Hogs consolidated the rest of the session and settled ear the low at 120.45. It was a quiet end to the week with Thursday’s new high and subsequent crash after a bullish Hogs and Pigs report created uncertainty in the futures market. The gap open on Thursday took price to a new high at 127.325 and put futures at an extreme premium to the Lean Hog Index. It created enough tension in the rubber band, in my opinion, that it couldn’t be held any longer and the snap back was pretty violent. Futures were trading at a little under 24 handles over Thursday’s Lean Hog Index, when normally futures are just around 12 handles over the index. The snap back still leaves futures rich to the cash index. If price can hold above settlement, we could re- test resistance at 122.275. A failure from the low, could see price work its way lower and approach support at 117.20.
The Pork Cutout Index up ticked and is at 106.60 as of 3/31/2022.
The Lean Hog Index decreased and is at 103.13 as of 3/30/2022.
Estimated Slaughter for Friday is 467,000, which is above last week’s 460,000 and last year’s 449,000. Saturday slaughter is expected to be 61,000, which is above last week’s 57,000 and last year’s 56,000. The estimated total for the week (so far) is 2,442,000 which is above last year’s 2,419,000 and below last year’s 2,460,000.
May Feeder Cattle couldn’t take advantage of weaker corn futures, consolidating within Thursday’s big breakdown candlestick. It did open higher and attempted to rally, trading past resistance at 167.175 to the session high at 167.70. It couldn’t move any higher and drifted, finally breaking down and trading to the session low at the end of the session at 165.75. Settlement came in at 166.125. The low was just below support at 165.775 and it was able to settle above it. Futures are also rich to its cash index, and on a Friday, it couldn’t take advantage of the weaker corn futures, with the weekend just around the corner. If settlement fails, we could see price continue lower and test support at the 21, 50 and 100 DMAS on my continuous chart. The 21-DMA is at 164.325, the 50-DMA is at 164.25 and the 100-DMA is just below it at 164.20. This is strong intermediate and longer-term support. It must hold a breakdown to this confluence of support or Feeders could be in trouble. If settlement holds, Feeders could re-visit resistance at 167.15.
The Feeder Cattle Index increased and is at 155.29 as of 3/28/2022.
June Live Cattle opened higher, traded to the session high at 137.875, and then broke down the rest of the session to the low at 135.45. It settled near the low at 135.85. The high stopped right at resistance at 137.875 and the decline took price below support at 136.35. The breakdown took cattle to the lower end of its 138.52 – 134.075 trading range. If price fails to hold settlement, we could see price test the low of the consolidation band. Support then comes in at the rising 200-DMA on the continuous chart now at 133.325. If price can hold settlement, we could see price test resistance at 136.35. Resistance then comes in at 137.875.
Boxed beef cutouts were mixed as choice cutouts declined 1.25 to 267.14 and select increased 0.18 to 262.52. The choice/ select spread narrowed and is at 4.62 and the load count was 100.
Friday’s estimated slaughter is 109,000, which is below last week’s 114,000 and above last year’s 104,000. Saturday’s slaughter is expected to be 40,000, which is below last week’s 57,000 and above last year’s 30,000. The estimated total for the week (so far) is 639,000, which is below last week’s 659,000 and above last year’s 603,000.
The USDA report LM_Ct131 states: So far for Friday negotiated cash trading has been mostly inactive on light demand in all major feeding regions. Not enough purchases in any region for an adequate market trend. In the Southern Plains on Wednesday live purchases traded at 138.00. In Nebraska on Thursday live and dressed purchases traded from 138.00-140.00 and at 222.00, respectively. In the Western Cornbelt on Thursday live and dressed purchases traded from 140.00-143.00 and at 222.00, respectively.
The USDA is indicating cash trades for live cattle from 137.00 – 143.50 and from 221.00 – 228.00 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, April 7, 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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