February Lean Hogs surged on heavy volume, trading up to 69.05 and settling there. This was a limit up move erasing the January 2nd collapse in the Feb contract. It took out that high at 68.975, closing above it. The low was at 65.00. The rally took price up to resistance at the declining 21-DMA now at 69.05. Cutouts are attempting to bottom as we are seeing heavy volume and prices are climbing. We could see the pork cutout index start to recover and the lean hog Index is expected to be higher on Friday and could have made a low at 65.05. We’ll see… Hogs still aren’t out of the woods as there is strong resistance just above at the declining 13-DMA at 69.375, the key level at 69.90 and the 50-DMA at 70.025. This rally however is a welcome reversal of the Tuesday crash, giving some hope to producers that perception could be changing in the direction of cash prices. Futures are above the index again and recent trading has seen traders eliminate that premium. Caution is warranted. If price can hold settlement, we could retest resistance at the above levels. Resistance then comes in at 71.325. If futures pull back from settlement, we could test support at 67.80 and then 66.55. Prop 12 is the law of the land in California so, traders will be watching very closely what happens to demand, prices and supply and how Californians are reacting to price. Will it surge or has the industry priced in pork and not change levels. What is the compliance rate of producers and is their enough supply in California? Will pork be dumped on the rest of the country as California is 12% – 15% of consumption pre-prop12? Will that change? There are at least 14 other states that have created rules for raising pigs to be sold as pork in their states. Will more come to the table or will the Federal government come up with a solution? Canada has already made some complaints and doesn’t like the idea of dealing with potentially 50 different state laws. We’ll see….
The Pork Cutout Index ticked higher and is at 83.48 as of 01/03/2024.
The Lean Hog Index increased and is at 65.19 as of 01/02/2024.
Estimated Slaughter for Thursday is 491,000, which is above last week’s 490,000 and last year’s 486,000. The estimated total for the week (so far) is 1,452,000, which is above last week’s 1,429,000 and below last year’s 1,473,000.
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be delayed to Tuesday, January 9, 2023, 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
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
tested support at the
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall not be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.