Commentary
October Lean Hogs made a new low at 53.175 and bounced. It traded up to 54.375 before pulling back and settling at 53.60. There is support at the 100 DMA (53.00) and the gap from the 8/19/2020 high (52.825) to the 8/20/2020 low (53.55). Price needs to hold here or a breakdown to support at 51.80 and then the 50 DMA (51.23) is possible. Support then comes in at 50.475. The bounce stopped below resistance at 54.775. This has to be taken out along with gap resistance created from Thursday’s low at 55.275 and Friday’s high at 55.075. Hogs are in a long-term downtrend but is attempting to build upon a short-term up-trend. Support needs to hold in my opinion or the fledging uptrend could disappear as the long-term down trend reasserts itself. Cutouts and the Lean Hog Index remain firm after making their lows last month, but could be peaking.
The Pork Cutout Index was decreased and is at 73.14 as of 8/28/2020. The Lean Hog Index down ticked and is at 57.05 as of 8/27/2020.
Estimated Slaughter for Monday is 486,000 which is above last week’s 469,000 and last year’s holiday shortened slaughter at 2,000.
October Feeder Cattle gap opened lower and made a new low for the down move at 138.725. The low was just below support at 138.95. Price didn’t stay here long and surged higher. It Reached 141.60 for the session high then consolidated before turning down at the end of the day to settle at 140.625. It formed an outside candlestick and settlement was in positive territory. It closed below resistance at 140.775 and the 50 DMA (140.91). If settlement holds a test of Monday’s high is likely. If price can overtake the high, a bounce to resistance at 142.40 is possible. Resistance then comes in at 143.50 and 144.24. A failure from settlement could see support revisited at 138.95. If price breaks down below support, a test of support at 136.75 is possible. The 200 DMA (135.68) and the rising 100 DMA (135.68) are next. The 100 DMA is looking like it will cross above the 200 DMA on Tuesday. This is supportive, in my opinion. This area must be defended on any break down or Feeders could see further weakness.
The Feeder Cattle Index declined and is at 140.99 as of 8/28/2020.
October Live Cattle gap opened lower and made a new low for the down move at 104.525. This in the middle of the 104.85 – 104.20 support zone. It is also just above the 50 DMA (104.37). Price was able to recover and it rallied to the high at 106.00. The recovery didn’t last and price pulled back and settled in the middle of the range at 105.30. If price holds settlement a retest of the high and a battle with the declining 200 DMA (106.92) is possible. Resistance then comes in at 107.30 and 108.65. A break down from settlement could see support retested. Below support is the October contract low at 103.65 (since it became the lead contract). A failure from here could see price break down and test support at 100.275.
Boxed beef cutouts were mixed with choice cutouts down 1.45 to 227.95 and select up 0.46 to 215.32. The choice/ select spread narrowed to 12.63 and the load count was 73.
Monday’s estimated slaughter is 119,000, which is above last week’s 117,000 and last year’s holiday shortened 4,000.
The USDA report LM_Ct131 states: Thus far Monday negotiated cash trade was mostly inactive on light demand in all feeding regions. The latest established market in any region was last week with live purchases at 105.00 in the Southern Plains. Last week in Nebraska, live purchases traded at 105.00 with dressed purchases mostly at 167.00. In the Western Cornbelt last week, live purchases traded from 104.00-107.00 with dressed purchases mostly at 167.00.
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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