Commentary
August Lean Hogs did little on Wednesday, forming an inside candlestick with a narrow range. Continuing worries about the large supply of market ready hogs are limiting the upside potential in my opinion. This is despite stabilizing cash prices and cutout prices. The backlog of hogs is keeping price cheap even in the face of record Chinese buying, in my opinion. I think China needs to buy more pork products but they seem to be happy limiting their purchases of pork. That’s with the Chinese buying record amounts of pork from the US. I just believe they have a much bigger need for consumer pork products than what they are satisfying. Their African Swine Fever problem remains and they continue to see the disease proliferate. But they are content to let the consumer just scrape by and pay up for pork as their prices continue to rise. They continue to press their people to change their diet, but so far, it’s not working, because price remains high. People still want to eat pork. So, we have plenty, they need more and more so come here and buy up our pork products and make everyone happy. Hogs settled at 50.15. A break below the Tuesday low (49.70) could see price test support at 47.825, in my opinion. Support on Thursday 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 67.31 as of July 14, 2020. The Lean Hog Index was higher and is at 46.05 as of July 13, 2020. Estimated Slaughter for Wednesday is at 470,000. This is higher than last week’s slaughter of 467,000 and last year’s slaughter at 463,000.
August Feeder Cattle surged on Wednesday, breaking above its 138.80 – 128.325 trading range and making a new high at 139.825. It settled near the high at 139.425. Cash sales have been strong and continue to strengthen as buyers have been aggressive in their pursuit of cattle. The Feeder Cattle Index has reflected this aggressiveness and has been rising. The Feeder Cattle Index was higher and is at 135.91 as of 7/14/2020. Continued strength could see August futures test resistance at 140.775, 142.40 and then 143.50. Thursday has support at 138.95, 136.75 and then 134.25.
August Live Cattle reversed Tuesday’s decline, surging and going up limit at the end of the session. It made the high at 101.80 and settled at 101.30. Cash trades are holding their ground after seeming to be weak yesterday as Iowa, Colorado and Nebraska are steady and Kansas saw some cattle trade at higher prices. Cutouts also gave some hope early as choice and select were in positive territory. Choice cutouts, however faded and was slightly lower on the afternoon report. Resistance is at 103.00 and then 104.20 – 104.85. Support is at 101.625, 100.275 and then 99.375. Boxed beef cutouts were mixed on Wednesday with choice cutouts down 0.16 to 200.76 and select up 0.52 to 191.37. The choice/ select spread narrowed to 9.39 and the load count was 151. Wednesday’s estimated slaughter is 119,000, down from last week’s 120,000 and below last year’s slaughter of 122,000. The USDA report LM_Ct131 states: Thus far for Wednesday negotiated trading in the Texas Panhandle has been limited on light demand. In Kansas negotiated cash trading has been limited on moderate demand. In the Southern Plains, when compared to the last reported market on Tuesday, live trades moved mostly steady at 95.00. In Kansas a few live trades moved up to 97.00. So far for Tuesday in the Northern Plains and Western Cornbelt negotiated cash trading has been slow on moderate demand. In Nebraska a few live and dressed trades moved at 96.00 and 157.00, respectively. Not enough for a full market trend. Last week live trades moved at 96.00 and dressed trades moved mostly at 157.00. In Colorado, when compared to last week, live trades moved 1.00 higher at 96.00. In the Western Cornbelt, when compared to the prior week, dressed trades moved steady from 157.00 to 160.00. Not enough live trades for a market trend. Tuesday was the last reported live trade market with trades from 97.00 to 100.00.
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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