Walsh Trading Daily Insights
Commentary
October Lean Hogs opened higher and tested resistance at 56.10 making the session high at 56.175. This is a new high for the up move but not a breakout as settlement was below resistance at 55.95. This is a positive showing however after two inside trading days with weak closes. A bullish cold storage report and renewed commitments to the phase 1 agreement with China are the main catalysts to the market strength, in my opinion. Even with the positive news Hogs couldn’t break out after besting Monday’s high. Bulls have to take control and push price higher or consolidation will continue. A break out above the Tuesday high could see price test resistance at 57.025. Resistance then comes in at 58.25 and 59.825. Support is at 55.625, 54.775 and 53.825. Hogs are in a long-term downtrend but is attempting to build upon a short-term up-trend. Cutouts and the Lean Hog Index remain firm after making their lows last month. China continues to auction pork from its frozen reserves as it will sell another 10,000 MT on Friday August 28th. That should bring the total auctioned this year above 500,000 MT. That will have to be replaced at some point.
The Pork Cutout Index was unchanged and is at 74.59 as of 8/24/2020. The Lean Hog Index rose and is at 56.06 as of 8/21/2020.
Estimated Slaughter for Tuesday is 484,000 which is above last week’s 483,000 and last year’s slaughter at 462,000.
October Feeder Cattle gap opened lower and made a new low at 141.80. It found support here and rallied past resistance at 143.50, making the high at 143.675. It settled at below resistance at 143.075. If price can climb past resistance at 143.50 at test of the gap created from the Friday low at 144.875 to the Monday high at 144.35 is possible. A breakdown below settlement could see price test support at 142.40 and then 140.775. Feeder Cattle is in an uptrend, in my opinion. The Feeder Cattle Index declined and is at 143.62 as of 8/24/2020.
October Live Cattle was able to close the gap from Friday’s low at 108.375 to the Monday high at 108.05. The rally to price to the high at 108.95 and a positive settlement at 108.775 which is above resistance at 108.65. If price can hold settlement a retest of resistance at 109.60 is possible. Resistance then comes in at 110.80. A failure from 108.65 could see price revisit support at the 200 DMA (107.19). Support is at 107.30, the 200 DMA and then 106.025.
Boxed beef cutouts were higher with choice cutouts up 2.21 to 229.68 and select up 1.01 to 212.26. The choice/ select spread narrowed to 17.42 and the load count was 104.
Tuesday’s estimated slaughter is 118,000, which is below last week’s 120,000 and last year’s 119,000.
The USDA report LM_Ct131 states: Thus far Tuesday negotiated cash trade and demand were light to moderate in the Texas Panhandle. Compared to Monday live purchases traded steady at 105.00. Trade was light on light to moderate demand in Kansas. A few early live purchases in Kansas traded from 105.00-107.00, however not enough for an adequate market test. The latest established market in Kansas, was last week with live purchases at 106.00. Trade was mostly inactive on light demand in all other feeding regions. The latest established market in the Northern Plains was last week with live purchases at 106.50 and dressed purchases in Nebraska at 169.00. Last week in the Western Cornbelt, live purchases traded from 106.00-109.00 and dressed purchases traded at 169.00.
Trade Suggestion(s)
Risk/Reward
Futures N/A
Options N/A
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays (except holiday weeks) and our next webinar will be on Thursday, August 27, 2020 at 3:00 pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon completion of the webinar.
**Call me for a free consultation for a marketing plan regarding your livestock needs.**
Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
Direct: 312.957.4163
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