Walsh Trading Daily Insights
Commentary
October Lean Hogs opened above the 100 DMA (52.88) but couldn’t generate any enthusiasm to trade higher. It couldn’t take out yesterday’s high and fell apart. It traded past support at 51.80 to the low at 51.275 and settled nearby at 51.425. This puts support at 50 .475 in play if bears can press the market. Bulls have to hold the line here or price can break down even further to support at 49.35. This will make it even more difficult for bulls to change the trend from down to up in my opinion. Someone keeps talking loud on how China is recovering from the African Swine Fever and how their hog numbers increased in July. Big Deal…They still have a long way to go in building up their herd to levels before the disease struck. They still get cases and it hasn’t gone away. One note… They say they are close to a vaccine as trials are going well… We’ll see… They are still auctioning pork from their frozen reserves…It will have to be replenished… I think this is all done to keep our prices down so they can by our pork on the cheap… What a great trading partner… China is in big trouble and continue to blather on to keep people from seeing the truth… They need food… They can’t sustain themselves and want to control the narrative… What a great trading partner… If price can hold settlement another attempt at the 100 DMA is possible. Hogs are still in a downtrend and face resistance at 51.80, the 100 DMA, 53.825, 54.775, 55.625 and then 56.10. Support is at 50.475, 49.35 and then 47.825. Cutouts and the Lean Hog Index remain firm after making their lows last month.
The Pork Cutout Index was higher and is at 73.04 as of 8/17/2020. The Lean Hog Index rose and is at 54.47 as of 8/14/2020.
Estimated Slaughter for Tuesday is 483,000 which is above last week’s 458,000 and last year’s slaughter at 482,000.
**China announced it will auction another 10,000 MT of frozen pork from its state reserves on Aug. 21. China has auctioned somewhere around 500,000 MT of pork so far this year. Once again… My guess is they will want to replenish their reserves at some point and where will they go to replace the pork they sold? I don’t think they have the ability to replace it with home grown pork…
September Feeder Cattle made an attempt to trade lower… taking out Monday’s low by a couple of ticks then rallying… It retraced most of yesterday’s decline, making the high at 145.925 and it settled nearby at 145.60. If settlement holds price could challenge resistance at 147.30. A breakdown below settlement could see price test support at 144.25 and then 143.50. Resistance is at 146.10, 147.30 and then 148.40. Feeder Cattle is in an uptrend, in my opinion. Support is at 145.05, 144.25, 143.50, 142.40 and then 140.775. The Feeder Cattle Index rose and is at 142.63 as of 8/17/2020.
October Live Cattle dipped below support at 109.60 to the low at 109.525. It held support and stubbornly moved higher and reached 110.325 for the high. This is just below resistance at 110.80. Settlement was at 109.875 unchanged on the day. If price breaks down the low a pullback to support at 108.65 is possible. If settlement holds, a retest of resistance at 110.80 is possible. A breakout above 110.80 could see price move towards resistance at 112.35. Resistance then comes in at 113.90. Support is at 109.60, 108.65, the 200 DMA (107.45), 107.30 and then 106.025.
Boxed beef cutouts were higher with choice cutouts up 3.60 to 220.86 and select up 2.71 to 204.65. The choice/ select spread widened to 16.21 and the load count was 173.
Tuesday’s estimated slaughter is 120,000, above last week’s 117,000 and above last year’s 117,000.
The USDA report LM_Ct131 states: Thus far for Tuesday in Kansas negotiated cash trading has been moderate with moderate to good demand. Compared to last week live purchases moved 2.00 to 3.00 higher from 106.00 to 107.00, mostly 106.00, with a few up to 108.00. So far for Tuesday in the Texas Panhandle, Northern Plains and Western Cornbelt negotiated cash trading has been limited with light demand. In the Texas Panhandle a few early live purchases moved at 106.00. However, not enough for a full market trend in any of these regions. Last week in the Texas Panhandle live purchases moved at 104.00. For the previous week in the Northern Plains live purchases moved from 106.00 to 106.50 and dressed purchases, in Nebraska, moved from 168.00 to 170.00. For the prior week in the Western Cornbelt live purchases moved from 105.00 to 107.00 and dressed purchases moved from 165.00 to 170.00.
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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