Walsh Trading Daily Insights
Commentary
December Lean Hogs traded both sides of unchanged in front of Thursday’s export sales numbers and the Quarterly Hogs and Pigs report. The sales numbers will be released before the open and Hogs and Pigs are out after the close. Traders will be watching the Chinese sales numbers and exports to see how they are responding to US pork price increases as they move away from Germany. Sales and exports (in my opinion) should grow going forward as the Chines have banned German pork because of the African Swine Fever crossing its border. The Chinese have also used up most of its frozen pork reserves and it will have to be replaced. In the Quarterly Hogs and Pigs Report, analysts estimate the USDA will report the Sept. 1 hog herd around 78.675 million head, little changed from year-ago levels. However, there is a lot of uncertainty about the impact of processing disruptions and euthanizing this spring/summer resulting from the Wuhan virus pandemic. Hogs kept for breeding are expected to drop 2.5% from year-ago and the market hog inventory is expected to climb 0.6% from year-ago. Support is at 63.325, 61.80, 59.825, 58.25 and then 57.025. Resistance is at 64.80, 66.55 and then 67.80. (See trade idea).
The Pork Cutout Index jumped and is at 87.32 as of 9/22/2020. The Lean Hog Index increased and is at 72.17 as of 9/21/2020.
Estimated Slaughter for Wednesday is 487,000 which is above last week’s 485,000 and last year’s slaughter at 476,000. The weekly estimates (so far) are 1,450,000, which is below last week’s 1,456,000 and above last year’s 1,390,000.
October Feeder Cattle consolidated within Tuesday’s trading range. It settled at 141.525. This is below resistance at 142.40 and above support at 140.775. Feeders are consolidating. The range is from the September 16 high at 144.00 and Tuesday’s low at 140.30. Resistance is at 142.40, the 50 DMA at 143.00 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 dipped and is at 142.28 as of 9/22/2020.
December Live Cattle rallied past resistance at 110.80 reaching the session high at 111.45. It settled at 111.20. Continued strength could see resistance at 112.35 revisited. A failure from 110.80 could see support tested at 109.60.
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.
Wednesday’s estimated slaughter is 120,000, which is even with last week and above last year’s 118,000. The weekly Total (so far) is 361,000, which is above last week’s 360,000 and last year’s 350,000.
The USDA report LM_Ct131 states: So far for Wednesday negotiated cash trade has been very limited on light demand in all feeding regions. Not enough purchases in any region for an adequate market trend. The latest established market in any region was for the prior week. In the Texas Panhandle live purchases moved from 103.00-103.50. In Kansas live purchases moved at 103.00. In Nebraska live purchases moved from 103.00-103.50 with dressed purchases from 163.00-164.00. In the Western Cornbelt live purchases moved from 103.00-105.00 and dressed purchases from 162.00-164.00.
Trade Suggestion(s)
Hogs – Buy the June 100 call and sell the June 110/100 put spread for negative 900.
Risk/Reward
Max risk is $400.00 per contract plus commissions and fees.
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 24, 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
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