Walsh Trading Daily Insights
Commentary
December Lean Hogs opened higher and took back some of Tuesday’s losses, consolidating within yesterday’s range and settling in the upper middle of the Tuesday range at 63.10. Thursday morning will show export demand and this could impact futures. The African Swine Fever up-ticked by 2 new cases in Germany’s wild boar population. The significance of this situation is 1 of the wild boars was found approximately 40 miles from the other cases. This shows how hard it is to keep this disease at bay and it should continue grow going forward in my opinion. It still hasn’t infected the market hog industry but the potential is growing in my opinion. China has been building its herd and they would love to be self-sufficient in this arena. With pork prices at high levels, every farmer is attempting to get in the action, while at the same time larger operations are popping up. With all this growth attempting to take place leads me to think the swine fever will eventually rear its ugly head as these small farmers just don’t have the desire or the capability to practice safe and secure farming. Support is at 61.80, 59.825, 58.25 and then 57.025. Resistance is at 63.325, 64.80, 66.55 and then 67.80. (See trade idea).
The Pork Cutout Index increased and is at 91.52 as of 9/29/2020. The Lean Hog Index increased and is at 75.91 as of 9/28/2020.
Estimated Slaughter for Wednesday is 473,000 which is below last week’s 487,000 and last year’s slaughter at 487,000. The weekly estimated total (so far) is 1,447,000, which is below last week’s 1,450,000 last year’s 1,461,000.
November Feeder Cattle opened higher but couldn’t rally past Tuesday’s high and was drifting…. then the grain report came out and corn surged…. Traders panicked and sold feeders hard. It took out yesterday’s low and closed the gap created from Tuesday’s strong open and made the low at 140.725. This is right at support (140.775) and price was able to get itself together and it recovered somewhat to settle at 142.35. This is right at the key level at 142.40. This pullback puts November Feeder Cattle back into the trading range established prior on the continuous chart. The high is 144.55 and the low is 139.05. Resistance is at 142.40, the 50 DMA (142.99), 143.50, 144.25, 145.05 and then 146.20. Support is at 140.775, 138.95 and then 136.75.
The Feeder Cattle Index increased to 142.58 as of 9/29/2020.
December Live Cattle made a new high at 113.575(by a tick) and then pulled back to support at 112.35 making the low at 112.10. It settled right at the 112.35 support level. It also pulled back into the trading range with the low of the range at 109.80. Cash traded higher at 106.00 to 107.00 on a live basis and 167.00 on a dressed basis. Cutouts continue to be firm when many thought it would be heading lower. Resistance is at 113.90 and then 114.65. Support is at 112.35, 110.80 and then 109.60.
Boxed beef cutouts increased with choice cutouts up 0.58 to 217.74 and select up 0.55 to 207.54. The choice/ select spread widened to 10.20 and the load count was 155.
Wednesday’s estimated slaughter is 120,000, which is even with last week and above last year’s 119,000. The weekly estimate (so far) is 358,000, which is below last week’s 361,000 and above last year’s 353,000.
The USDA report LM_Ct131 states: So far for Wednesday negotiated cash trading has been limited on light to moderate demand in Nebraska and Western Cornbelt. A few early live and dressed purchases in both regions have moved at 107.00 and 167.00, respectively. In the Southern Plains negotiated cash trading has been mostly inactive on very light demand. Not enough purchases in any region for a full market trend. Last week in all major feeding regions live purchases moved at 105.00. In Nebraska and Western Cornbelt dressed purchases moved at 165.00.
Trade Suggestion(s)
Hogs – Buy the June 100 call and sell the June 110/100 put spread for negative 860.
Risk/Reward
Max risk is $560.00 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, October 1, 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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