Commentary: August Lean Hogs consolidated within Thursday’s trading range. Thursday’s trade saw a close of the 50.60 – 50.35 gap with a high of 51.175. The Friday trade saw sellers come in and take price down to support at 49.35 making the session low at support. It settled at 49.875. The inability to make a new high on Friday and pullback to support keeps us in a trading range with the low at 47.575 and the top of the range now at 51.175. 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 Monday is at 49.35, 47.825, 46.30 and then 43.05. Resistance is at 50.475 and then 51.80. The Pork Cutout Index increased and is at 65.37 as of July 9, 2020. The Lean Hog Index decreased and is at 45.18 as of July 8, 2020. Estimated Slaughter for Friday is at 466,000. This is higher than last week’s holiday slaughter of 176,000 and last year’s slaughter at 460,000. Saturday’s slaughter is estimated to be 283,000up from last year’s 39,000. This puts this week’s slaughter on top of last year with 2,606,000 vs. last year’s 2,419,000. Saturday’s are becoming critical to eating through the excess supply in my opinion.
August Feeder Cattle returned to the 200 DMA (135.64) on the continuous chart, making the high at 136.05 and settling at 135.75. The rally on Friday was a good way to end the week and a strong open on Monday could see price test the top of the trading range at 138.80. Another failure at the 200 DMA could see price test the rising 50 DMA now at 132.95. Monday has support at 135.60, 134.25, 133.50, the 50 DMA and then 132.075. Resistance is at 136.75, 138.95 and then 140.775. The Feeder Cattle Index is strengthening and is at 134.92 as of 7/9/2020.
August Live Cattle held support at 99.375, making the low just below it at 99.175. It made its way higher and settled at 100.00. The high was 100.225, and even though it ended the week on a positive note, it still only traded within Thursday’s trading range. If price can trade above the Thursday high, it could revisit the July 6th high at 101.425. Resistance is at 101.625 and then 103.00. A pullback could see support tested at 99.375, 97.075 and then 96.10. Boxed beef cutouts were mixed on Friday with choice cutouts up 0.91 to 204.50 and select down 0.54 to 194.29. The choice/ select spread widened to 10.21 and the load count was 93. This is the smallest load count in a while. Friday’s estimated slaughter is 119,000, above last week’s 109,000 and above last year’s slaughter of 117,000. Saturday’s slaughter is estimated at 71,000 which is above last year’s 65,000. Saturday’s slaughter expectations put this week’s slaughter above last years. This week’s estimated slaughter is estimated to be 664,000 vs. last year’s 658,000. The USDA report LM_Ct131 states: Thus far Friday negotiated cash trade was limited on light to moderate demand in most feeding regions. Not enough purchase in any region for and adequate market test. The latest established market in any regions was on Thursday with purchases in the Northern Plains mostly at 96.00 with dressed purchases mostly at 157.00 in Nebraska. In the Western Cornbelt on Thursday, live purchases traded mostly at 99.00 with dressed purchases from 157.00-160.00. The latest established market in the Southern Plains was on Wednesday, with live purchases at 95.00 it the Texas Panhandle and from 94.00-95.00 in Kansas.
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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