Commentary: August Lean Hogs rebounded on Tuesday, but still traded within Monday’s trading range. Hogs are in a downtrend and face resistance at 51.80, 52.60 (trendline) and then 53.825 on Wednesday. The Tuesday range is 51.65 – 50.50 and settlement was near the high at 51.475. Support on Wednesday is at 50.475, 49.35 and then 47.825. Cutouts and cash are stabilizing in my opinion and China will sell another 10,000 MT of frozen pork from its reserves on July 23. China has sold 420,000 MT of pork this year to try and stabilize pork prices and keep the country supplied with pork products. It is failing in this quest as prices continue to rise and supplies remain tight. They still need to import vast amounts of food for their people to eat because they can’t produce enough at home, in my opinion, to solve their supply and price problems. They have imported record amounts of pork from the US this year but their desire to find the Wuhan virus on food products imported from other countries is causing delays in getting product to their consumers and causing frustration with their trading partners. The Pork Cutout Index increased and is at 68.37 as of July 20, 2020. The Lean Hog Index was higher and is at 47.90 as of July 17, 2020. Estimated Slaughter for Tuesday is at 478,000. This is higher than last week’s slaughter of 475,000 and last year’s slaughter at 476,000.
August Feeder Cattle traded within Monday’s trading range. It has also consolidated within Thursday’s trading range for the past three days. Thursday saw a new high made at 143.825 and then a strong pullback on Monday to test support at 138.95. It traded to 139.425 and then rallied to settle at 141.60. Tuesday’s consolidation was 142.35 to 140.725. A rally above the Tuesday high could see price retest the Thursday high while a failure from the low could see support revisited at 138.95. The Feeder Cattle Index was higher and is at 136.48 as of 7/20/2020. Resistance is at 142.40, 143.50 and then 144.25. Thursday has support at 140.775, 138.95, 136.75 and then 134.25.
October Live Cattle is also consolidating within its Thursday range. Thursday’s range was 107.225 – 104.20. Tuesday’s range 106.775 – 105.725. Settlement is at 106.125. A rally above the high could see resistance tested at the 200 DMA on the continuous chart at 108.10. A decline from the low could see support tested at 104.20, which is also the Thursday low. Resistance is at 107.30, the 200 DMA, 108.65 and then 109.60.104.20 – 104.85. Support is at 106.025, 104.85 -104.20 and then 103.00. Boxed beef cutouts were lower on Tuesday with choice cutouts down 0.86 to 200.88 and select down 0.29 to 191.30. The choice/ select spread narrowed to 9.58 and the load count was 159. Tuesday’s estimated slaughter is 118,000, down from last week’s 119,000 and below last year’s slaughter of 121,000. The USDA report LM_Ct131 states: Thus far for Tuesday negotiated cash trading in the Southern Plains have been slow on light to moderate demand. A few early live trades moved mostly at 96.00. However, not enough trades for a full market trend. In the Northern Plains and Western Cornbelt negotiated cash trading has been inactive on very light demand. Not enough trades for a market trend. The latest established market in any region was last week with live purchases in the Southern Plains mostly at 95.00. In Nebraska, live purchases traded from 96.00-97.50 with dressed purchases mostly at 157.00. In Colorado live purchases traded at 96.00. In the Western Cornbelt, live purchases traded from 97.00-100.00 with dressed purchases at 157.00, few up to 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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