Walsh Trading Daily Insights
Commentary
December Lean Hogs broke down hard trading to the low at 61.40 and settling nearby at 61.55. This is below support at 61.80 and puts 59.825 in traders’ sights. Support is at 59.825, 58.25 and then 57.025. Resistance is at 64.80, 66.55 and then 67.80. The market reacted to the weakness in outside markets amid worries the Europe might go into lockdown as the Wuhan virus case load increases in many countries. China has whittled away at is frozen reserves, auctioning more than 450,000 tons from last September to August 2020. Analysts are suggesting China is running out of its reserves and if they continue to auction pork at its present rate their reserves will be depleted within 2 to 3 months. This will have to be replaced. With China attempting to rebuild its herd, imports will remain a key focus of the Chinese government in my opinion. With Germany on the chopping block US exports should play a major role in the restocking of their reserves and in supplying the Chinese consumer with pork. Cash and cutout prices remain firm and are rising.
The Pork Cutout Index jumped and is at 84.40 as of 9/18/2020. The Lean Hog Index surged and is at 69.58 as of 9/17/2020.
Estimated Slaughter for Monday is 485,000 which is below last week’s 486,000 and above last year’s slaughter at 444,000.
October Feeder Cattle broke down and tested support at 140.775, making its low at 140.60. Support held and price recovered to settle near the session high (142.725) at 142.25. This is still below resistance at 142.40 and the rising 50 DMA at 142.84. This is a key area in my opinion. Feeders are consolidating between the September 16 high at 144.00 and Thursday’s low at 140.575. Resistance is at 142.40, the 50 DMA and then 143.50. There is resistance at the gap from 144.35 to 144.875. Resistance then comes in at 145.05 and 146.20. Support is at 140.775 and then 138.95.
The Feeder Cattle Index jumped and is at 142.18 as of 9/17/2020. (No update as I write my article.)
December Live Cattle broke down below its 112.525 – 110.725 trading range to the session low at 109.95. It bounced and settled at 110.60. This is below the 110.80 support level and will likely key trade for Tuesday. A failure from settlement could see price test support at 109.60 and then 108.65. Support then comes in at 107.30. A break out above 110.80 could see resistance tested at 112.35. Resistance then come in at 113.90 and then 114.65.
Boxed beef cutouts were higher with choice cutouts up 0.58 to 216.22 and select up 1.88 to 205.82. The choice/ select spread narrowed to 10.40 and the load count was 106.
Monday’s estimated slaughter is 120,000, which is even with last week and above last year’s 115,000.
The USDA report LM_Ct131 states: So far for Monday negotiated cash trading in the Southern Plains and Nebraska has been at a standstill. In the Western Cornbelt negotiated cash trading has been inactive with very light demand. Not enough purchases for a market trend. Last week in the Texas Panhandle and Nebraska live purchases moved from 103.00 to 103.50 and dressed purchases, in Nebraska, moved from 163.00 to 164.00. For the prior week in Kansas live purchases moved mostly at 103.00. For the previous week in the Western Cornbelt live purchases moved from 103.00 to 105.00 and dressed purchases moved from 162.00 to 164.00.
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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