Commentary: October Lean Hogs is the lead contract in the Hog complex as its volume is higher than the August volume. October Hogs gap opened higher and traded to the session high at 50.975. It couldn’t hang on to the gains and broke down, trading to the session low at 49.65. It settled near the low at 50.075. Hogs rallied on better cash and cutout prices, in my opinion. The failure came about as traders started to worry about the rising tension between the US and China. Hogs are in a downtrend and face resistance at 50.475, 51.80, 52.43 (down sloping trendline) and then 53.825 on Thursday. Support on Thursday is at 49.35, 47.825 and then 46.30. 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. The Pork Cutout Index jumped and is at 69.70 as of July 21, 2020. The Lean Hog Index rose and is at 48.64 as of July 20, 2020. Estimated Slaughter for Tuesday is at 478,000. This is higher than last week’s slaughter of 470,000 and last year’s slaughter at 475,000. Th Cold Storage report showed frozen pork supplies were down 1% from the previous month and down 25% from last year. Stocks of pork bellies were down 8% from last month and down 2% from last year.
August Feeder Cattle traded within Tuesday’s trading range. It has also consolidated within Thursday’s trading range for the past four days. Thursday saw a new high made at 143.825, while its low was at 138.925. Wednesday’s low was right on support at 140.775. Its high was 142.025. Settlement was at 141.525. 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. The Feeder Cattle Index dipped lower and is at 136.42 as of 7/21/2020.
October Live Cattle continued its consolidation within its Thursday range. Thursday’s range was 107.225 – 104.20. Wednesday’s range 106.30 – 105.325. Settlement is at 105.725. A rally above the high could see resistance tested at the 200 DMA on the continuous chart at 108.07. A decline from the low could see support tested at 104.20, which is also the Thursday low. Resistance is at 106.025, 107.30, the 200 DMA, 108.65 and then 109.60. Support is at 104.85 -104.20 and then 103.00. Boxed beef cutouts were mixed on Wednesday with choice cutouts up 0.27 to 201.15 and select down 2.02 to 189.28. The choice/ select spread widened to 11.87 and the load count was 124. Wednesday’s estimated slaughter is 117,000, down from last week’s 119,000 and below last year’s slaughter of 122,000. The USDA report LM_Ct131 states: Thus far for Wednesday Negotiated cash trading has been limited on light to moderate demand in all major feeding regions. In the Southern Plains not enough purchases in any price range for an adequate market trend. Tuesday was the last reported market at 96.00. In Nebraska, when compared to last week, live purchases moved 0.50 to 2.00 higher at 98.00 and dressed purchases moved 1.00 to 1.50 higher from 158.00 to 158.50. In Colorado, when compared to the prior week, live purchases moved mostly 2.00 higher at 98.00. In the Western Cornbelt not enough purchases in any price range for an adequate market trend. The latest established market was last week with live purchases from 97.00-100.00 and dressed purchases at 157.00 with a few up to 160.00.
The Cold Storage Report showed total pounds of beef in freezers were up 3% from the previous month and up 6% from last year.
Trade Suggestion(s)
Risk/Reward
Futures N/A
Options N/A
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Ben DiCostanzo
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