Walsh Trading Daily Insights
Commentary
August Lean Hogs continued lower on Wednesday, trading down to 47.90 and settling nearby at 47.95. Hogs are in a trading range with the low at 47.525 and the high at 50.35. A break below the low end of the trading range keeps the down trend intact and sets the stage for a possible test of lower support levels. Support on Thursday is at 46.30 and then 43.05. Resistance is at 49.35, 50.475 and then 51.80. The Pork Cutout Index decreased and is at 64.03 as of July 7, 2020. The Lean Hog Index increased and is at 45.90 as of July 6, 2020. Estimated Slaughter for Wednesday is at 467,000. This is lower than last week’s slaughter of 469,000 and last year’s slaughter at 482,000.
China has continuing problems with the African Swine Fever. Southern China is reported to have more cases of the disease although the government has not reported on the matter. Their hog prices are rising once again as piglet prices are soaring making life difficult for smaller farmers. China wants to modernize their hog production and move towards commercialization of the industry into large producers. The continued proliferation of the disease and resultant higher hog prices is helping their cause but in the short run is hurting the consumer as pork prices continue to surge. Consumers are once again starting to back-off from eating pork as prices rise. China is auctioning 20,000 MT of frozen pork from its state reserves on Friday to combat the rise in consumer prices. It has sold almost 400,000 MT of pork from its reserves this year in an attempt to curb prices and maintain supplies. Is it enough? They have increased their imports of pork to unprecedented levels, yet are pulling back from taking delivery of pork from international processors that have tested positive for the corona virus. Their need is great for pork and they have tested imports for the virus without having any positive virus results. Yet they continue to play games, in my opinion with their trading partners and their people. What are they trying to accomplish? They need pork and can’t get enough of it but they still play games. We have pork and plenty of it. And it is cheap and of high quality. If they really care about their people they would take as much pork from us as they can get shipped. This would help their people and our producers. Yet, they play games.
August Feeder Cattle broke down and tested support at 133.50, making the low just below it at 133.10. It settled at 134.05. It continued its rejection of the 200 DMA (135.70) as it makes its way back to the middle of the 138.80 – 128.325 trading range. Thursday has support at 133.50, the 50 DMA at 132.67 and then 132.075. Resistance is at 134.25, 135.60, the 200 DMA, 136.75, 138.95 and then 140.775. The Feeder Cattle Index hasn’t updated yet and is at 130.13 as of 7/6/2020.
August Live Cattle sagged some more on Wednesday. It traded down to 98.925 and settlement was at 99.15, just below support at 99.375. Support for August is at 98.125, 97.075 and then 96.10. Resistance is at 99.35, 100.275 and then 101.625. Boxed beef cutouts sank on Wednesday with choice cutouts down 1.47 to 203.83 and select down 1.32 to 195.52. The choice/ select spread narrowed to 8.31 and the load count was 178. Wednesday’s estimated slaughter is 120,000, below last week’s 121,000 and above last year’s slaughter of 118,000. The USDA report LM_Ct131 states: Thus far Wednesday trade and demand was moderate in the Southern Plains. Compared to Tuesday in the Texas Panhandle, live purhcases traded steady at 95.00. Compared to Tuesday in Kansas live purchases traded steady to 1.00 lower from 94.00-95.00. Trade was slow on moderate demand in the Northern Plains. In Nebraska a few early live purchases traded from 95.00-96.00, however not enough for an adequate market test. Last week in Nebraska live purchases traded from 95.00-96.00 with dressed purchases from 157.00-160.00 on Tuesday. Last week in Colorado, live purchases traded mostly at 96.00. Trade was slow to moderate on moderate demand in the Western Cornbelt. Compared to Tuesday, live purchases traded steady to 2.00 higher from 99.00-100.00. A few dressed purhcases traded from 157.00-158.00, however not enough for an adequate test. The latest established market in the Western Cornbelt was on Monday at 160.00.
Trade Suggestion(s)
Risk/Reward
Futures N/A
Options N/A
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Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
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