Live Cattle
On Monday May 21, 2018, the August Live Cattle contract opened (99.25) near the low (99.15), and traded higher for the remainder of the day reaching 101.225. This was a limit move to the up side, but it couldn’t stay up limit and it pulled back and settled at 100.625. It couldn’t move past resistance at 101.625 and it settled under it. It closed above resistance at 100.275. !01.625 and 100.275 will be the key levels for the August contract on Tuesday, in my opinion. Trading above 101.625 could lead to a test of resistance at 103.00. Resistance then comes in at 104.20. If futures break below 100.275, a test of support at 99.375 is possible. Support then comes in at 97.35. Market strength could be attributed to a truce in the trade war with China as Treasury Secretary Mnuchin says tariffs will be put on hold during negotiations to put a trade framework in place. President Trump also tweeted that the trade agreement would be one of the best things to happen farmers in many years. On Monday negotiated cash trade was at a standstill in all major feeding regions. Monday afternoon beef cutout values were lower on light to moderate demand and moderate offerings. Choice was down 1.39 at 230.82 with Select down 0.94 to close at 207.52 on 109 loads. The choice/ select spread narrowed to 23.30. The hide and offal value from typical fed cattle for today was estimated at 9.46 per cwt live, unchanged from Friday’s value. The estimated cattle slaughter for Monday was reported at 120,000.
Feeder Cattle
The August Feeder Cattle contract opened at 138.85, dipped to the low of the day at 138.75, which is just below resistance (138.95) and then blew through resistance and traded higher the rest of the day. It traded past resistance at 140.775, reaching the session high at 141.15. It pulled back and settled at 140.50, below the 140.775 resistance level. A continuation to the upside could see price test resistance at the downward sloping trendline at 142.00. Resistance then comes in at 142.425 and the 100 DMA at 143.225. A failure from 140.775 could see price revisit the 138.95 support level.
Lean Hogs
The June Lean Hogs contract opened at 75.20, made a weak attempt to test the 75.60 resistance level (reaching the session high at 75.35), and then it collapsed. It broke down through support levels (21 DMA (74.85), Trendline (74.725, 50 DMA (74.15), and 74.125), on its way to the session low at 72.975. This is just above the 72.875 support level and the 100 DMA at 72.65. It recovered and rallied, settling at 74.00. A failure at the 74.125 resistance level could see price revisit the low and test the lower support levels. A rally above 74.125 could see price consolidate within the upper end of the Monday range.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursday, May 24th 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.