Walsh Trading Daily Insights
Commentary
March Feeder Cattle broke down to a new low early in the trading session, getting down to 180.875 and then racing higher to the session high at 182.525. This wasn’t sustained and the market pulled back and revisited the 100-DMA now at 181.20 before a bounce led to a settlement at 181.725. Corn’s early strength had Feeders teetering but support at 180.80 was able to hold back the selling and then a pullback in corn led to the rally to test resistance at 182.70. The resistance held however as the rising 50-DMA now at 182.625 also provided interference for bulls. The cash index is in decline and is expected to move lower as bad weather is taking over in the North, limiting interest in putting cattle in feedlots. That will change when the weather clears and feedlots get some order back in their yards, in my opinion. If Feeders hold settlement, we could re-test resistance at 182.70. Resistance then comes in at 184.375. If settlement fails, we could re-test support at 180.80, and then move towards support at 178.95.
The Feeder Cattle Index decreased and is at 179.09 as of 01/17/2023.
April Live Cattle tried to rally early in the session, reaching the session high at 160.875. The high is just above resistance at 160.75 and below the Tuesday high at 160.90. It quickly pulled back and traded to the session low at 160.025. It drifted the rest of the session and settled at 160.225. It was a nothing day, consolidating within Tuesday’s candle and forming an inside candlestick. With weather conditions in the Northern regions a mess, activity in the cash market has been limited and packers have been able to get price moving lower, so far. Slaughter was curtailed on Wednesday, down 7,000 head from last week. I am going to assume it is due to the weather conditions. If cash doesn’t improve, we could see the April contract move towards the cash price as expectations for higher cash diminish. I think this could occur in the short-run as the weather is and high feed has forced producers to give in and with the packers able to cut down slaughter numbers, has pushed more cattle to the future creating more angst in the producer world as hoped for higher pricing keeps getting delayed. That should change at some point, but as we know (in my opinion), packers always seem to put that point further down the road. They are used to making money these past few years even during periods where they usually lose money and are working to keep that intact as this is a period when they usually lose some money and they are spoiled. The Cattle on Feed report is due out on Friday and it is expected to be bullish as placements, on feed and marketings are all expected to be down from last year. If settlement holds, we could re-test resistance at 160.75. Resistance then comes in at 161.75. A failure from settlement could see price test support at 159. 075. Support then comes in at 157.25.
Boxed beef cutouts were lower as choice cutouts fell 2.58 to 274.08 and select decreased 0.67 to 253.86. The choice/ select spread narrowed and is at 20.22 and the load count was 123.
Wednesday’s estimated slaughter is 120,000, which is below last week’s 127,000 and above last year’s 116,000. The estimated total for the week (so far) is 373,000, which is below last week’s 383,000 and above last year’s 344,000.
The USDA report LM_Ct131 states: So far for Wednesday in Nebraska negotiated cash trade has been limited on very light demand. In the Western Cornbelt negotiated cash trade has been mostly inactive with very light demand. In the Southern Plains negotiated cash trading has been at a standstill. Not enough purchases in any region for a market trend. The latest established market was last week in these regions. In the Southern Plains live purchases traded at 156.00. In Nebraska live and dressed purchases traded from 156.00-157.00 and from 250.00-252.00, respectively. In the Western Cornbelt live and dressed purchases traded at 158.00 and from 250.00-252.00, respectively.
The USDA is indicating cash trades for live cattle from 153.00 – 156.00 and from 245.00 – 248.00 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, January 19, 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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