Commentary
October Lean Hogs retraced most of Monday’s gains forming an inside candlestick. It settled near the low at 51.825 which is right at support at 51.80. This has to hold as yesterday’s rally took price up to resistance at the downward sloping 100 DMA (53.95), making a new high at 54.15 in an attempt to break free of its downtrend. Today’s price action could be seen as a potential failure with the rejection at resistance and the decline down to support. A breakdown from the 51.775 low could see price test support at 50.475. If price can hold the low, we may see another attempt made at the 100 DMA. Cutouts and the cash market continue to be firm after making their lows. Hogs are still in a downtrend and face resistance at 53.825, the 50 DMA, and then 54.775. Support is at 51.80, 50.475, 49.35, 47.825 and then 46.30.
The Pork Cutout Index increased and is at 68.82 as of 8/10/2020. The Lean Hog Index increased and is at 53.02 as of 8/7/2020.
Estimated Slaughter for Tuesday is 458,000 which is just under last week’s 459,00 and below last year’s slaughter at 475,000.
China announced it will auction another 10,000 MT of frozen pork from its state reserves on Aug. 14.
September Feeder Cattle grinded higher on Tuesday, approaching resistance at 147.30 making the high at 147.125 It settled nearby at 146.625. A rally above 147.30 could see price revisit the recent high at 148.875. Resistance is at 147.30, 148.40 and then 148.875. Feeder Cattle is in an uptrend, in my opinion. Support is at 146.20, 144.25, 143.50, 142.40 and then 140.775. The Feeder Cattle Index declined and is at 142.33 as of 8/10/2020.
October Live Cattle rallied to a new high reaching 108.875 before settling just below it at 108.30. Settlement was just below resistance at 108.40. It is once again above the 200 DMA (107.62). Holding the 200 DMA and breaking above 108.40 could see price test resistance at 109.60. Resistance then comes in at 110.80 and 112.35. Support is at the 200 DMA, 107.30 and then 106.025.
Boxed beef cutouts were higher with choice cutouts up 0.88 to 208.08 and select up 1.09 to 195.02. The choice/ select spread narrowed to 13.06 and the load count was 156.
Tuesday’s estimated slaughter is 117,000, above last week’s 116,000 and even with last year.
The USDA report LM_Ct131 states: So far for Tuesday negotiated cash trading has been limited on light demand in Kansas, Nebraska and Western Cornbelt. In Kansas a few live purchases moved at 103.00. In the Western Cornbelt a few live purchases moved at 105.00. In the Texas Panhandle and Colorado negotiated cash trading has been at a standstill. Not enough purchases for a full market trend in any feeding region. Last week in the Southern Plains live purchases moved at 103.00. For the prior week in the Northern Plains and Western Cornbelt live purchases moved at 103.00. For the previous week in Nebraska and Western Cornbelt dressed purchases moved 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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