The February Lean Hogs contract gap opened higher, tested Friday’s settlement at 70.575, making the low at 70.60 and then made its way higher. The rally took price above the December 13th high at 71.55, making a new high at 71.90. It settled nearby at 71.80. This right at the high end of the 71.55 – 71.85 resistance area. Tuesday is month end / year end and a shortened trading session so a pullback into the 71.55 – 68.70 trading range is possible as traders may decide to get out of long positions in front of the New year’s holiday. If traders remain aggressive, looking at the upcoming new year as a sign of potential aggressive Chinese pork purchases; then a test of resistance at 72.80 is possible. The February high (the day it became lead contract) is next at 73.40. The Lean Hog index down-ticked and is at 59.03 as of 12/26/2019. The Pork Cutout Index declined and is at 76.15 as of 12/27/2019.
The February Live Cattle spent the day grazing. Another quiet holiday trading session. The range was tight with the high at 126.975 and the low at 126.10. Settlement was at 126.425, just below the key level at 126.625. If price can hold above 126.625, a test of resistance at 128.10 is possible. A failure from settlement could see price test support at 125.80 and then the December 23rd low at 125.225. Cash was at a standstill in most regions, but the Western Cornbelt saw some light trading at 195.00 on a dressed basis. There wasn’t enough for a trend. Boxed Beef cutouts were higher on moderate to good demand and heavy offerings. Choice cutouts rose 0.70 to 209.66 and select was up 0.84 to 205.41. The choice/ select spread narrowed to 4.25 and the load count was 106. Slaughter was estimated to be 116,000.
March Feeder Cattle is now the lead contract as its volume was higher than the January contact’s volume. March is lower than the January contract, so its first session took it down to the middle of the December 26th trading range. The range was 146.65 to 142.525. The March contract traded from a high at 144.90 to the low at 144.225. It settled at 144.50. It also traded in a ho-hum holiday trading session. If price can take out resistance at 145.05, a recovery to resistance at 146.20 is possible. Aggressive buying could see price make its way toward resistance at 147.30. A failure from settlement could see price test support at 143.50. A failure from 143.50 could see a break down and a test of support at 142.40 and the nearby 200 DMA at 142.20. The Feeder Cattle Index collapsed and is at 139.14 as of 12/27/2019.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays, but due to the holiday season our next webinar will be on January 9th 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,
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.