Walsh Trading Daily Insights
Commentary
The livestock markets opened weak making new lows for the down move. They staged a remarkable turnaround surging off the lows and most ended positive for the session. April and June Live Cattle were problem children. June Lean Hogs opened limit down, but the limit down move didn’t prevail as the new low brought short covering into play, in my opinion. With June trading into an anti-seasonal lower end of the 40-handle reaching 43.825 on the open print buyers came in force. This lifted price over seven handles reaching the high at 51.075 before pulling back and settling at 49.65. June Live cattle opened weak and nearly went down its expanded limit making its low at 76.60 before surging and topping out at 82.95. It broke down from here and settled at 80.30. Worries about plant slowdowns and shut downs and a slowing slaughter pace because of this resulting in hogs and cattle backing up in the coming weeks. The fear of a major reduction in production and thereby any need for packers to purchase cattle leading to the volatility in the futures markets. This has also propped up cutout prices in cattle, enabling packers to once again win on both ends. From what my customers tell me slaughter plants are among the cleanest places around as inspectors maintain a watchful eye over plant operations. Plants are kept as safe as possible for employees even as the pressure to produce is intense. The US needs to keep the food chain going and even in China for the most part it didn’t fail… I expect this to be the same for the US as measures to keep workers safe from the effect of the coronavirus have been put in place. Packers profits are huge and I believe they will do all they can to keep the supply train moving. This especially goes for cattle as packers are said to be making even more money than when the Tyson fire shut down its Kansas plant. Slaughter levels are down in both cattle and hogs on Monday as cattle slaughter came in at 110, 000 and hogs at 477,000. Cattle is well off last years’ pace at 121,000 for this week but hogs are down only 1,000 head from last year. There are stories going around that packers may slaughter on Sunday to keep up production. In my opinion, futures and especially computerized trading has injured the cash market and put a lot more fear in the market than necessary. In my opinion, futures are here for price discovery and for the opportunity of risk transfer from cash market participants to speculators. From those that want to minimize risk to those that want to assume that risk for the opportunity of profit. Once again, in my opinion, something needs to be done about computerized trading in such a thinly traded market and put price discovery back in the hands of human beings, not some program that watches for headlines and can see depth of market which was forbidden in futures trading pits, when only humans were involved in trading. Why are computers which move and analyze at lightening speed given such an advantage over human beings, especially in such a thinly traded marketplace. Just my opinion. In my opinion, this pressure in the markets on the front end and the following nature of the back months could set the stage once again for a substantial rally in those later months if the virus comes under control and humans can get back some normalcy in their lives, in my opinion. Stay tuned!
Trade Suggestion(s)
Risk/Reward
Futures – N/A
Options – N/A
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays and our next webinar will be on Thursday, April 9,2020 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
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