Commentary
October Lean Hogs made a new high at 56.70 and then reversed course and traded down to the low at 54.65. It bounced off the low and settled in the middle of the trading range at 55.55. The new high wasn’t able to challenge resistance at 57.025 while the low tested support at 54.775. Thursday brings export sales numbers and this could be the key to whether resistance is tested or a break down to the breakout candle low is revisited. That low is 53.55 and there is a gap from there to the Friday high at 52.825. Resistance is at 55.625, 56.10 57.025and then 58.25. Support is at 54.775, 53.825, the gap and then 51.80. 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 increased and is at 74.77 as of 8/25/2020. The Lean Hog Index rose and is at 56.60 as of 8/24/2020.
Estimated Slaughter for Wednesday is 482,000 which is above last week’s 476,000 and last year’s slaughter at 489,000.
October Feeder Cattle made a new low at 141.15. It settled at 141.925. Feeders made an early show of strength making the high at 143.975 but couldn’t sustain it. Price failed below resistance at 144.25 and pressed prices lower. Settlement was below support at 142.40 and this is a negative going into Thursday’s session. A failure from settlement could see price test support at 140.775. A rally above 142.40 could see resistance at 143.50 tested. A push above resistance at 144.25 could see the gap created from the Friday low at 144.875 to the Monday high at 144.35 tested. Feeder Cattle is in an uptrend, in my opinion. The Feeder Cattle Index dipped and is at 143.60 as of 8/25/2020.
October Live Cattle disappointed bulls on Wednesday. The failure to hold above 108.65 led to a challenge of support at the 200 DMA (107.13) making the low below it at 106.575. Settlement was below the 200 DMA at 107.00. A continued break down could see price test support at 106.025 and then make its way towards the 104.85 support level. If price can hold settlement a retest of resistance at 108.65 is possible. Resistance then comes in at 109.60 and then 110.80.
Boxed beef cutouts were higher with choice cutouts up 1.77 to 231.45 and select up 1.85 to 214.11. The choice/ select spread narrowed to 17.34 and the load count was 121.
Wednesday’s estimated slaughter is 118,000, which is below last week’s 119,000 and above last year’s 117,000.
The USDA report LM_Ct131 states: Thus far Wednesday trade and demand were moderate in Nebraska and the Western Cornbelt. Compared to last week in Nebraska, live purchases traded 1.50 lower at 105.00. Dressed purchases compared to last week traded 2.00 lower from 166.00-167.50, mostly at 167.00. Compared to last week in the Western Cornbelt, early live purchases traded 2.00-4.00 lower from 104.00-105.00. Dressed purchases compared to last week traded 2.00 lower at 167.00. Trade was light on light to moderate demand in Kansas. In Kansas compared to Tuesday, live purchases traded steady at 105.00. Trade was limited on light demand in the Texas Panhandle. The latest established market in the Texas Panhandle was on Tuesday with live purchases at 105.00.
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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