Walsh Trading Daily Insights
Commentary
October Lean Hogs rebounded after testing support (81.70) in the beginning of the day, making the session low at 81.65. It rallied, drifted, made the high at 83.50 and then dipped to settle at 83.075. The rally took price just past resistance at 83.325 and this proved to be too tough for the market to overtake, settling below it, forming an inside candlestick. This keeps the burden on bulls to overcome key resistance. Holding 81.70 was critical in my opinion and settling above support at the 200-WMA at 82.575 gives them another week to right the ship. The cash market has been erratic with cutouts, cash trading and exports struggling to maintain a strong posture. Seasonals suggest a topping action soon and the August contract is starting to falter, expecting the LHI to pull back as it nears expiration. This is keeping pressure on October as it is trading at a steeper than usual discount to the index. This same discount could also limit the downside for Hogs as bulls will try to keep price from moving too far out of line with the index. Exports need to improve as Hogs won’t survive on US demand alone, in my opinion. If Hogs overtake resistance at 83.325, it could test resistance at the declining 8-DMA now at 84.20. Pushing past here could see a run to resistance at 85.325. A failure at settlement could see another test of the 81.70 support level. Support then comes in at 80.45.
The Pork Cutout Index increased and is at 114.54 as of 8/03/2023.
The Lean Hog Index ticked higher and is at 105.86 as of 8/02/2023.
Estimated Slaughter for Friday is 418,000, which is below last week’s 460,000 and above last year’s 453,000. Saturday slaughter is expected to be 30,000, which is below last week’s 82,000 and last year’s 65,000. The estimated total for the week (so far) is 2,338,000, which is below last week’s 2,392,000 and above last year’s 2,335,000.
September Feeder Cattle broke out of its trading range and traded to a new all-time high for the lead contract at 254.15. The low was at 250.90 and settlement was at 253.45, also a new all-time high. A strengthening fat market and neutral corn supported Feeders. If futures can hold settlement, we could test resistance at the Friday high and then the Daily R1 now at 254.75. Resistance then comes in at the Daily R2 at 256.075. A failure at settlement could see price test support at 252.325 and then 251.30.
The Feeder Cattle Index increased and is at 245.84 as of 8/03/2023.
October Live Cattle broke out again from its consolidation as traders once again feel that packers are going to have to pay up to buy cattle to meet their needs. With lackluster trading in the cash market this week, traders jumped to the conclusion that packers will have to be aggressive at the end of the week to buy cattle because they are out of time. Producers’ have been patient and even as packers continue to stunt slaughter levels, have kept to their commitment to prevent a collapse in cash prices. They haven’t made a new high, but they haven’t cratered, giving them continued confidence that price could make new highs, sooner, rather than later. Cutouts are stable, but teetering at the psychological 300.00 level, much to the packers’ chagrin as they are losing money in my opinion. Packers cut slaughter even more this week, it’s down to 613,000 estimated for the week, cutting production as they look to level up cutouts. Cattle made the low at 181.30 and rallied until mid-morning and made the high at 183.725. It pulled back and settled at 182.90. If settlement holds, price could test resistance at 184.35. Resistance then comes in at 185.575. A failure below the low could see price test support at 182.575. Support then comes in at 181.175.
Boxed beef cutouts were lower as choice cutouts decreased 0.22 to 301.79 and select declined 1.83 to 276.48. The choice/ select spread widened and is at 25.31 and the load count was 121.
Friday’s estimated slaughter is 113,000, which is above last week’s 110,000 and below last year’s 114,000. Saturday slaughter is expected to be 6,000, which is below last week’s 10,000 and last year’s 38,000. The estimated total for the week (so far) is 613,000, which is below last week’s 619,000 and last year’s 648,000.
The USDA report LM_Ct131 states: So far for Friday in the Western Cornbelt negotiated cash trading and demand have been moderate. Compared to the last reported market on Thursday, Live FOB purchases traded mostly steady at 188.00. Not enough Dressed Delivered purchases for a market trend. Last week Dressed Delivered purchases traded from 292.00-295.00. In Kansas and Nebraska negotiated cash trading has been limited on light demand. In Kansas, a few Live Delivered purchases traded from 184.00-185.50. In Nebraska, a few Live FOB purchases traded at 188.00. In the Texas Panhandle negotiated cash trading has been mostly inactive on very light demand. Not enough purchases in these three regions for a full market trend. The latest established market was last week in the Southern Plains, Live FOB purchases traded from 178.00-179.00. The latest established market was last week in Nebraska, Live FOB purchases traded at 186.00 and Dressed Delivered purchases traded from 292.00-295.00.
The USDA is indicating cash trades for live cattle from 179.00 – 190.00 and from 294.00 – 297.00 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, August 10, 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
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