The February Lean Hogs contract consolidated within Thursday’s trading range. It formed an inside candlestick and is below the declining 100 DMA (68.69) and above the 13 DMA (66.16). The low (66.625) today was above the 66.55 support level. The high was just above the 67.80 resistance level at 68.275. Settlement was at 67.65. This is just below resistance and just above the 50 DMA at 67.27. The Hog market is coiling and getting ready to break out, in my opinion. A breakdown below the 13 DMA could see price test support between 64.80 and 64.25. Support then comes in at 63.325. A rally above the 100 DMA could see price test resistance at 69.80. Cold storage report showed frozen pork supplies up 3% from the previous month and up 8% from last year. Pork Bellies were up 13% from last month and up 72% from last year. The Lean Hog index ticked lower and is at 59.54 as of 11/20/2019. The Pork Cutout Index fell and is at 85.84 as of 11/21/2019.
The February Live Cattle contract broke down below the 124.30 support level, trading down to 123.30 and settling nearby at 123.85. The break down took place in front of the cattle on feed report which was released after the close. Traders lightened positions as the report was expected to be bearish as placements were expected to be large. Expectations were for on feed to be up 1.3%, placements to be up 12.2% and marketings down 0.4%. The report showed on feed up 1%, placements up 10% and marketings down 1%. Cold storage also is out and it showed beef supplies in freezers down 1% from the previous month and down 10% from last year. A rally above 124.30 could see resistance at 125.80 tested. A break down below the low could see support tested at 122.825 and then 121.90. Cash traded this week between 114.00 and 118.00 on a live basis and 182.00 to 185.00 on a dressed basis. Boxed Beef cutouts were lower on light demand and moderate offerings. Choice cutouts fell 2.29 to 232.57 and select was down 2.54 to 211.32. The choice/ select spread narrowed to 21.25 and the load count was 104. Slaughter was 114,000. Saturday slaughter estimated at 81,000 to bring the weekly estimate to 662,00.
January Feeder Cattle crashed, nearly going down limit during the session. It made the low at 138.275, below the 138.95 support level. Price recovered above the 138.95 support level, settling at 139.275. If settlement holds a recovery through the 100 DMA (139.91) is likely, with price testing resistance at 140.775. Resistance then comes in at 142.40. The 200 DMA is now at 142.38. A break down below the low could see price test support at 136.75. The Feeder Cattle Index was lower and is at 145.47 as of 11/21/2019.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursday, December 5th 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.