Livestock Report

Ben DiCostanzo General Commentary Leave a Comment

Commentary

    October Lean Hogs opened above trendline resistance at 49.575 and kept going higher reaching 51.85 before falling back and settling at 50.975. The breakout is a positive step in trying to get a recovery in Hogs. The pullback at the end of the session kept price below the downward sloping 50 DMA on the continuous chart at 51.10 and shows resistance at 51.80 is strong, in my opinion. Traders seem to have been encouraged by talk that there will be an aid package from the government for hog producers and they will pay producers for euthanizing hogs because of the inability to get them slaughtered due to the backlog. Cutouts and the cash market also continue to be firm after making their lows. Hogs are still in a downtrend and face resistance at the 50 DMA, 51.80 and then 53.825. Support is at 50.475, 49.35, 47.825 and then 46.30.

     The Pork Cutout Index increased and is at 66.90 as of 8/6/2020. The Lean Hog Index decreased and is at 52.78 as of 8/5/2020.

    Estimated Slaughter for Friday is 474,000 which is even with last week and above last year’s slaughter at 449,000. Slaughter for Saturday is estimated to be 230,000 which is well above last week’s 177,000 and last year’s 52,000. Slaughter for the week is estimated at 2,534,000 which is lower than last week’s 2,538,000 but above last year’s 2,350,000.

   September Feeder Cattle opened lower, tried to regain its footing and couldn’t do it. It traded past resistance at 146.20 to the high at 146.55 and then broke down to its low at 144.975. It settled nearby at 145.125. Settlement was above the 145.05 support level. This has to hold on Monday, in my opinion or price could start to test lower support levels. Resistance is at 146.20, 147.30 and then 148.40. Feeder Cattle is still in an uptrend, in my opinion. Support is at 144.25, 143.50, 142.40 and then 140.775. The Feeder Cattle Index jumped higher and is at 141.92 as of 8/6/2020.

    October Live Cattle tried to reclaim yesterday’s decline early in the trading session. It traded to its high at 107.60 which is just below the 200 DMA on the continuous chart at 107.69. This checked the buying, in my opinion and the market traded lower the remainder of the session. It made its low at the end of the day at 106.25 and settlement was nearby at 106.45. The low and settlement is just above support at 106.025. This has too hold on Monday in my opinion or we can see price test support at the rising 21 DMA at 105.30. Resistance comes in at 107.30, the 200 DMA, 108.65 and then 109.60. Support is at 106.025, 104.85 -104.20 and then 103.00. Today was option expiration for the August contract and Monday is first notice day for the contract.

    Boxed beef cutouts were higher with choice cutouts up 0.81 to 205.47 and select up 0.74 to 192.75. The choice/ select spread widened to 12.72 and the load count was 116.

    Friday’s estimated slaughter is 109,000, below last week’s 113,000 and below last year’s slaughter of 117,000. Saturday slaughter is estimated at 60,000, above last week’s 51,000 and last year’s 47,000. The weekly total is estimated to be 633,000, lower than last week’s 638,000 and last year’s 647,000. There are issues at a major plant that has reduced slaughter for this week. Not sure if it is a long-term issue or temporary. Stay tuned.

    The USDA report LM_Ct131 states: Thus far for Friday in Kansas, Northern Plains and Western Cornbelt negotiated cash trading has been limited with light demand. In the Texas Panhandle negotiated cash trading has been at a standstill. Not enough trades in any region for a full market trend. The last reported market in the Southern Plains was on Wednesday with live purchases at 100.00. Thursday was the last reported market in the Northern Plains and Western Cornbelt with live purchases at 103.00 and dressed purchases, in Nebraska and Western Cornbelt, at 163.00.                                                               

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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