Walsh Trading Daily Insights
Commentary
October Lean Hogs gap opened higher, closed the gap and drifted for the middle part of the session before surging after noon (CT), making a new high at the end of the session at 56.925. It settled at 56.40. This continues the short-term uptrend and if price can overtake resistance at 57.025, it has a chance to challenge resistance at the declining 200 DMA now at 59.40. The past few attempts at trading beyond the 200 DMA failed and led to lower prices. Let’s hope Thursday’s exports show some strength and leads to expectations that demand is strong and will remain strong causing the 200 DMA to eventually become strong support and not just a selling opportunity for lower prices. Resistance is at 57.025, 58.25, the 200 DMA and then 59.825. Support is at 56.10, 55.625 and then 54.775. Hogs are in a long-term downtrend but is building 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.
** 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 the supply shortage and the resulting higher prices caused by the African swine fever outbreak. (China will eventually need to replace the pork stocks that were sold, in my opinion.)
The Pork Cutout Index down ticked and is at 72.72 as of 9/1/2020. The Lean Hog Index increased and is at 56.80 as of 8/31/2020.
Estimated Slaughter for Wednesday is 480,000 which is below last week’s 482,000 and last year’s slaughter at 488,000.
October Feeder Cattle broke down and traded to a new low for the down move. It traded down to 138.025 and recovered to settle in the middle of the range at 139.45. It is now solidly below the 50 DMA (141.20) and the short-term moving averages are flowing lower. This is not a positive sign for Feeder Cattle. Price must hold here and consolidate with an upward lean to flatten these out and change sentiment, in my opinion. A failure from the low 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 (136.15) crossed above the 200 DMA (135.65) which is positive for Feeders in my opinion.
The Feeder Cattle Index dipped and is at 140.35 as of 9/1/2020.
October Live Cattle broke down and traded to a new low at 103.375, stopping just above support at 103.00. It recovered and settled at 104.475. It settled below the 50 DMA (104.73) and is near the lower part of the 104.85 – 104.20 support band. Price needs to reclaim the 50 DMA or a retest of the Wednesday low is possible. Support is at 104.20, 103.00 and then 100.275. Resistance is at the 50DMA, 104.85, 106.025 and there is strong resistance at the 200 DMA (106.72). Resistance then comes in at 107.30 and 108.65.
**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 lower with choice cutouts down 0.76 to 227.58 and select down 0.93 to 213.82. The choice/ select spread widened to 13.76 and the load count was 114.
Wednesday’s estimated slaughter is 117,000, which is below last week’s 118,000 and even with last year.
The USDA report LM_Ct131 states: Thus far Wednesday negotiated cash trade was light on light to moderate demand in Kansas, Nebraska and the Western Cornbelt. In Kansas compared to Tuesday a few live purchases traded steady to 1.00 lower at 103.00. In Nebraska a few dressed purchases traded from 162.00-163.00, however not enough for an adequate market test. The latest established market in Nebraska was on Tuesday with live purchases from 102.00-103.00, mostly at 103.00 and dressed purchases from 162.00-164.00, mostly from 163.00-164.00. In the Western Cornbelt a few live purchases were reported at 104.00, however not enough for an adequate market test. The latest established market in the Western Cornbelt was on Tuesday with live purchases at 103.00 and dressed purchases from 162.00-164.00, mostly from 163.00-164.00. Trade was limited on light demand in the Texas Panhandle thus far Wednesday. The latest established market in the Texas Panhandle was on Tuesday with live purchases at 104.00.
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
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