Walsh Trading Daily Insights
Commentary
December Lean Hogs is the lead contract as its volume has overtaken the October contract’s volume. December Hogs broke down on Wednesday, trading through support at 61.80 to the session low at 61.25. It was able to bounce and settle above support at 61.975. More profit taking in Hogs as traders lighten positions before the Us Export sales report on Thursday. Will we see a buying spurt from Asian counties as they move away from German pork? The Germans have found more wild boar dead from the disease in the same area as the initial discovery. This is near the border with Poland, which has been fighting the disease for a while. They haven’t seen any farm animals come down with the disease and have quarantined the affected area. Protocols are being implemented and the Germans want to see exports banned from the affected area, not the whole country. So far that desire has been rejected as most of Asia has banned imports from the entire country. Where there is smoke there is fire…where you see one roach…there are many…. I think this is just the beginning…Hopefully for the Germans we have learned enough about containment and they can mitigate the spread. The break down to support is a good buying opportunity, in my opinion. With cutouts and the cash market strong, Hogs could be poised to continue its short-term up trend. Support is at 61.80, 59.825 and the 200 DMA at 59.16. Resistance is at 63.325, 64.80 and then 66.55.
The Pork Cutout Index increased and is at 81.38 as of 9/15/2020. The Lean Hog Index increased and is at 65.35 as of 9/14/2020.
Estimated Slaughter for Wednesday is 485,000 which is above last week’s 484,000 and below last year’s slaughter at 487,000. The weekly slaughter (so far) is estimated at 1,456,000, higher than last week’s (holiday week) 955,000 and below last year’s slaughter at 1,469,000.
October Feeder Cattle failed to build on Tuesday’s rally and sank back to test support at 142.40 making the low at 142.15. The rising 50 DMA is also right at 142.40. It settled right at support at 142.425. This should provide the key to trade on Thursday, in my opinion. If settlement holds, price can once again reverse course and test resistance at 143.50 and then 144.25. A failure from settlement could see support tested at 140.775.
The Feeder Cattle Index ticked higher and is at 140.60 as of 9/15/2020.
December Live Cattle is now the lead contract as its volume has overtaken the October volume. The December contract made the session high at 112.475. This is just above resistance at 112.35. Resistance held and drifted lower to 111.40. It settled in the middle of the range at 111.95. A failure from settlement has support at 110.80, 109.60 and then 108.65. Resistance is at 112.35, 113.90 and then 114.65.
Boxed beef cutouts were lower with choice cutouts down 0.71 to 215.38 and select down 1.77 to 204.51. The choice/ select spread widened to 10.87 and the load count was 166.
Tuesday’s estimated slaughter is 120,000, which is even with last week and above last year’s 117,000. The weekly estimated slaughter (so far) is 360,000, higher than last week’s (holiday week) 241,000 and last year’s slaughter at 356,000.
The USDA report LM_Ct131 states: So far for Wednesday in the Southern Plains negotiated cash trading has been slow with light demand. Compared to last week, in the Texas Panhandle, live purchases moved 1.50 to 2.00 higher from 103.00 to 103.50 on light test. In Kansas, when compared to the prior week, live purchases moved 2.00 higher at 103.00. Thus far for Wednesday in Nebraska and Western Cornbelt negotiated cash trading has been inactive on very light demand. Not enough purchases in these regions for a market trend. For the prior week in Nebraska live purchases moved mostly at 101.00 and dressed purchases moved from 160.00-161.00. For the previous week in the Western Cornbelt live purchases moved from 100.00-103.00 and dressed purchases moved from 160.00-161.00.
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 17, 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.