The February Lean Hogs contract opened below the 100 DMA (67.21) at 66.975 made the high at 67.05 and then broke down. It blew through support at 66.55 on its way to the session low at 65.575. This is just above the December 2nd low at 65.40. Hogs repeatedly attempted to pierce 65.575 but couldn’t do it and it also couldn’t rally off this level, settling nearby at 65.90. If price fails from settlement a test of the December 2nd low is likely and then support at 64.80. The cash index is languishing and February Hogs is way above the index with a month left to expiration. If price can hold settlement, a test of resistance at 66.55 and then rising 50 DMA now at 67.92 is possible. April will soon be the lead contract as its volume is very close to the February contract. The Lean Hog index decreased and is at 59.36 as of 01/09/2019. The Pork Cutout Index decreased and is at 73.29 as of 01/10/2019.
The February Live Cattle contract stalled on Monday. It pulled back to support at 126.625, making the low at 126.45 and traded inside Friday’s range. It settled near the low at 126.55. It was a disappointing and boring start to the week as price wasn’t able to pierce the December 13 high at 127.90 after showing promise on Friday and it traded in a quiet narrow range. If price can hold support, a re-test of the Friday high is possible and then resistance just above it at 128.10. A break out above 128.10 could see price approach resistance at the March 1, 2019 high at 130.45. A failure from settlement could see price test support at 125.80 and then 124.30. Cash trade disappointed last week with packers and producers refusing to budge from their price parameters resulting in a light trade at steady prices. Cutouts have fallen and are below last year’s levels in a (in my opinion) snap back exaggerated move after staying exceptionally strong for such a long period. This includes the choice/ select cutout spread that collapsed close to even after remaining in the mid-twenties for much of the year in 2019. Cash trade was inactive on light demand with dressed purchases at 200.00. Boxed Beef cutouts were higher on moderate to good demand and moderate offerings. Choice cutouts increased 0.51 to 210.55 and select was up 1.68 to 208.23. The choice/ select spread narrowed to 2.32 and the load count was 118. Slaughter was estimated to be 121,000.
March Feeder Cattle also failed to continue higher on Monday. It opened at resistance at 147.30 and made its high just above resistance at 147.425 and then fell to the low of the day at 145.80. It settled near it at 145.65. The decline however, was not enough to take price past Friday’s low, and it also ended up with an inside candle. The low is also just above the rising 8 DMA now at 145.60. If settlement holds, price can re-visit resistance at 147.30. A failure from settlement could see price break down and test support at 145.05 and then 144.25. The Feeder Cattle Index decreased and is at 146.46as of 01/10/2020.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays, and our next webinar will be on January 16th 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.**
Senior Market Strategist
Walsh Trading, Inc.
www.walshtrading.comRISK 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.