The April Lean Hogs contract broke out above the 200 DMA (74.52), trading past resistance at 75.60 to the high at 75.975. It couldn’t reach resistance at 76.175 and pulled back to settle at 75.35. If settlement holds, a test of resistance at 76.175 is possible. Resistance then comes in at 77.80. A failure settlement could see price re-test the 200 DMA and then support at 74.25. The Lean Hog index increased and is at 61.02 as of 01/21/2019. The Pork Cutout Index increased and is at 76.89 as of 01/22/2019. The LHI and the PCI are starting to edge higher and are above last years levels for this time period, with the PCI almost $10 higher. This could be the spark Hogs need.
The April Live Cattle contract collapsed on Thursday, nearly going down limit as traders liquidated longs in front of the Cattle on Feed report, in my opinion. The report comes out on Friday at 2pm CT after the market closes. Estimates are: on feed – +2.2%, placements – +3.2% and marketings – +5.2%. The descent took price to support at 124.30, making the low just below it at 124.00. It settled below support at 124.175. It is now in the lower end of the 127.90 – 123.30 trading range. If price can hold settlement, consolidation within the Thursday range is likely. A failure from settlement could see price test support at the trading range low and then 122.80. The futures collapse didn’t have any effect on price for cash trading for Thursday. Trade was light to moderate on moderate demand in Nebraska and the Western Cornbelt. Compared to Wednesday in Nebraska live and dressed purchases traded steady at 124.00 and 199.00 respectively. In the Western Cornbelt compared to Wednesday, live purchases traded steady at 125.00. Compared to last week, dressed purchases traded steady to .50 higher from 198.00-199.50. Trade was limited on light to moderate demand in the Southern Plains with a few live purchases steady compared to Wednesday at 124.00. Boxed Beef cutouts were mixed on light to moderate demand and offerings. Choice cutouts increased 0.36 to 215.32 and select was down 0.82 to 211.20. The choice/ select spread widened to 4.12 and the load count was 119. Slaughter was estimated to be 122,000. Slaughter for the week is estimated to be at 490,000, above last years for this week’s 466,000.
March Feeder Cattle broke down through the lower end of its 147.75 – 141.325 trading range, trading below the 100 DMA (142.19) and then the 200 DMA (141.775) and even support at 140.775 to the session low at 140.35. It settled below support at 140.525. If settlement holds consolidation within the Thursday range is likely. A breakdown below settlement could see price test support at 138.95 and then the November 22nd low at 138.275. This is the low of the larger 147.75 – 138.275 trading range. A new low puts the uptrend in Feeder Cattle in jeopardy. The Feeder Cattle Index declined and is at 144.86 as of 01/22/2020.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays, but with the holiday on Monday, our next webinar will be on Friday January 24th at 2:00 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.
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.