Walsh Trading Daily Insights
Commentary
October Lean Hogs opened higher and rallied into the gap created from Thursday’s low at 55.275 and Friday’s high at 55.075. The rally stopped just short of a gap close reaching 55.20 before settling nearby at 55.025. Resistance is at the gap close, 55.625, 56.10 and then 57.025. Support at the 100 DMA held, now we have to see whether price find the energy to work its way past resistance and the August 26th high at 56.70 to continue the short-term uptrend. A failure from settlement could see price test support at 54.775 and then 53.825. The 100 DMA is at 53.05. Hogs are in a long-term downtrend but is attempting to build upon a short-term up-trend. The cutouts and the Lean Hog Index remain firm after making their lows last month, but could be peaking. Today marks the start of the CME’s annual reset of daily limits. Hogs will now have a $3.00 daily limit which expand to $4.50 (down from the previous $3.75/5.50).
** China will auction another 20,000 MT of frozen pork from its state reserves on Friday, Sept. 4. More than 500,000 MT of frozen pork stocks have been sold to help alleviate supply shortage caused by the African swine fever outbreak.
The Pork Cutout Index decreased and is at 72.85 as of 8/31/2020. The Lean Hog Index decreased and is at 56.60 as of 8/28/2020.
Estimated Slaughter for Tuesday is 480,000 which is below last week’s 484,000 and above last year’s slaughter at 475,000.
October Feeder Cattle made an attempt to rally past the 50 DMA (141.09) making the session high at 141.825. It couldn’t sustain the rally attempt and settled at 140.65. It formed a doji candlestick indicating the uncertainty in the market. Price must regain the 50 DMA and stay above it or a retest of the 138.725 low from Monday is possible. A failure could see price test support at 136.75. Resistance is at 140.775, the 50 DMA, 142.40 and then 143.50. Support is at 138.95, the low, 136.75 and then 135.60. The rising 100 DMA (135.90) crossed above the 200 DMA (135.65) which is positive for Feeders in my opinion.
The Feeder Cattle Index declined and is at 140.52 as of 8/31/2020.
October Live Cattle traded between resistance at 106.025 and support at the 50 DMA (104.59). The range was from 105.875 high to 104.75 low. Settlement was at 105.475. Price is consolidating as traders watch the cash market (see below). There is strong resistance at the 200 DMA (106.82). Resistance then comes in at 107.30 and 108.65. Support is at 104.85 – 104.20, 103.00 and then 100.275.
**China will auction 4,400 MT of frozen beef and mutton from state stockpiles. Beef prices in China have risen 10 consecutive weeks.
Boxed beef cutouts were mixed with choice cutouts up 0.39 to 228.34 and select down 0.57 to 214.75. The choice/ select spread widened to 13.59 and the load count was 124.
Tuesday’s estimated slaughter is 120,000, which is above last week’s 118,000 and last year’s 114,000.
The USDA report LM_Ct131 states: Thus far Tuesday negotiated cash trade was moderate on light demand in the Texas Panhandle. Compared to last week in the Texas Panhandle, live purchases traded 1.00 lower at 104.00. Trade was light on light to moderate demand in Kansas, Nebraska and the Western Cornbelt. Early live purchases in Kansas traded from 103.00-104.00. In Nebraska a few early purchases traded and 103.00 with dressed purchases from 163.00-164.00. In the Western Cornbelt early live purchases traded from 102.50-103.00. However not enough purchases in these regions for an adequate market test. The latest established market in Kansas was last week with live purchases at 105.00. 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
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, September 3, 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
888.391.7894
Fax: 312.256.0109
www.walshtrading.com
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (WTI) shall be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.