Live Cattle
The October Live Cattle contract made a new low for the down move on Thursday, August 24, 2017, trading down to 104.625, just below the August 18th low of 104.75. It wouldn’t remain down there for after a 3 hour consolidation period, the October contract staged a late session surge to test the 13 DMA (107.30) once again. It reached a high of 107.45, before ending the day at 106.875, just below the 13 and 8 (107.00) DMAs. The reversal could be short covering as traders start to lighten positions in front of Friday afternoon’s Cattle on Feed report. The report is expected to show july placements up 6.2% over last year, July marketings up 4.5% – 4.9% over last year and cattle on feed for August 1st up 4.7% – 4.9% over last year. A break out above the Thursday high could lead to a test of resistance at 108.675 and then the 21 DMA at 109.575. A failure from here could see another test of support at 104.85 and then 103.00. The negotiated cash market saw some trading at 106.00 – 107.00 for live and 165.00 – 170.00 for dressed. Thursday afternoon boxed beef cutout values were lower on Choice and Select on light to moderate demand and moderate offerings. Choice was down 0.58 at 191.75 and Select down 0.81 to 188.66 on 157 loads. The choice/ select spread widened to 3.09. The estimated cattle slaughter for Wednesday was reported at 117,000.
Feeder Cattle
The September Feeder Cattle gap opened lower and traded down to the low of the day at 139.40. This is just above support at 138.95 and the low for the down move at 138.35. It also staged a late day rally as it briefly overtook the 13 DMA (142.225). It reached a high of 142.925 and then ended the session at 142.05, just below the 13 DMA. The 8 DMA is nearby at 141.85 and we could see another short covering rally if the September contract can sustain a trade above the Thursday high. Resistance is close at 143.50 then 144.65. The 21 DMA is nearby at 144.70 and could slow any upside move. A pullback from the 8 DMA could lead to a test of support at 140.75, 139.90 and then 138.95.
Lean Hogs
The October Lean Hogs contract broke down to a new low at 62.625. It found support at that level and ended the session at 63.925, forming a hammer candle stick. It is the second hammer candlestick in a row and it also formed an outside day candle. This is potentially bullish and a rally above the session high (64.025) could lead to a test of the 64.90 resistance level. A break down from the low could lead to a test of the 61.80 support level. Pork belly prices continued to decline, as it was down 6.41 to 145.60. Pork Belly prices have been a key driver for the Lean Hogs and a continued break down could lead to a bigger decline in the futures market.
For those interested I hold a weekly livestock webinar on Thursday, August 25 at 3:00pm. 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
www.walshtrading.com
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.