Commentary
October Lean Hogs was able to hold above Tuesday’s low bouncing back to retest the declining 100 DMA (52.77) making the high at 52.825. It settled nearby at 52.55. It formed an inside candlestick. Thursday morning brings the export sales report and I think this will key trade on Thursday. A strong showing in the report could see price break out above the 100 DMA and test resistance at 53.825. Resistance then comes in at 54.775, 55.625 and then 56.10. Hogs are still in a downtrend. A weak export sales report could see price retest support. Support is at 51.80, 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 73.94 as of 8/18/2020. The Lean Hog Index rose and is at 54.81 as of 8/17/2020.
Estimated Slaughter for Wednesday is 484,000 which is above last week’s 481,000 and last year’s slaughter at 480,000.
**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.**
September Feeder Cattle pushed above Monday’s high and traded to the high at 147.10 which is just under resistance at 147.30. The inability to trade above resistance saw price pullback and settle at 146.00 which is just below resistance at 146.10. If settlement holds price could challenge resistance again 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 down-ticked and is at 142.62 as of 8/18/2020.
October Live Cattle crept higher eking above Tuesday’s high but unable to make a new high for the up move. Price reached 111.05 which is above resistance at 110.80 but just shy of the Monday 111.15 high. Settlement was positive as the 110.825 settlement was just above the 110.80 resistance level. Price is struggling to move higher even as cutouts have been strong and have surged to levels not seen since June of this year. Traders seem to be focusing on what may happen after the retail Labor Day buying is complete with cutouts expected to decline once that is done. Cash has stalled with producers wanting higher prices and packers not willing to give up any margin. Traders are likely reluctant to advance futures much higher without a corresponding increase in cash prices. If price fails to hold settlement a pullback to support at 109.60 and then 108.65 is possible. If settlement holds, a test of resistance at 112.35 is possible. Resistance then comes in at 113.90. Support is at 109.60, 108.65, the 200 DMA (107.40), 107.30 and then 106.025.
Boxed beef cutouts were higher with choice cutouts up 2.18 to 223.04 and select up 1.00 to 205.65. The choice/ select spread widened to 17.39 and the load count was 179.
Wednesday’s estimated slaughter is 119,000, above last week’s 117,000 and above last year’s 118,000.
The USDA report LM_Ct131 states: So far for Wednesday in the Southern Plains negotiated cash trading has been moderate with light demand. Compared to the last reported market on Tuesday live purchases moved steady at 106.00. Thus far for Wednesday in the Western Cornbelt negotiated cash trading has been limited on light demand. A few live purchases moved at 107.00. However, not enough for a full market trend. Last week live purchases moved from 105.00 to 107.00 and dressed purchases moved from 165.00 to 170.00. So far for Wednesday in the Northern Plains negotiated cash trading has been at a standstill. 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.
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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