The February Lean Hogs contract continued its attack on the down side, going limit down and settling just above the down limit price at 66.775. The beatdown shows the increasing worry traders have about trade with China. Or, should I say lack of trade with China. Even though sales and exports are strong to China, perception is the US is missing out on an even bigger slice of the pie. We have increased our production of pork in anticipation of large Chinese purchases and the lack of anticipated huge Chinese purchases on a consistent basis to eat through this supply has hurt cash prices even though cutouts have recovered in a nice fashion. However, even as cash prices remain weak for producers, the major packing companies are telling producers to eliminate the use of the banned (in China) substance Ractopamine in their raising of hogs. I believe they are getting prepared for massive exports of pork to the Asian countries that have been devasted by the African Swine Fever. That includes China. Something is up. The limit down move took us to support at 66.55. The session low was just above it at 66.625. A break down below support could see price test support at the 21 DMA at 65.64. Support then comes in at 64.80 to 64.25. A recovery from settlement could see price consolidate in the Wednesday range. The Lean Hog index ticked higher and is at 59.29 as of 11/18/2019. The Pork Cutout Index fell and is at 86.95 as of 11/19/2019.
The February Live Cattle contract approached resistance at 125.80, making the high nearby at 125.65. It was another quiet session as price continues to churn during the session and then pop at the end of the day. Settlement was at 125.475. It is between resistance at 125.80 and support at 124.30. A break out above 125.80 could see resistance at 126.625 tested and then 128.10. A break down below 124.30 could see support tested at 122.825 and then 121.90. Cash traded at 116.00 on a live basis in Texas and Kansas. Boxed Beef cutouts were lower on light to moderate demand and offerings. Choice cutouts fell 0.80 to 238.21 and select was down 0.70 to 214.77. The choice/ select spread narrowed to 23.44 and the load count was 123. Slaughter was 117,000.
January Feeder Cattle tested resistance at 145.05, making the high just below it at 144.775 and made the low just below support (143.50) at 143.10. It settled at 144.075. A break down from 143.50 could see support tested at the 200 DMA now at 142.41. A rally above the high could see resistance tested at 146.20. The Feeder Cattle Index was lower and is at 146.54 as of 11/18/2019.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursday, November 21st 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.