Walsh Trading Daily Insights
December Lean Hogs Consolidated with the upper end of Thursday breakout candle. The high was at 67.375 and the low at 66.35. It settled at 67.125. It looks to me traders were spooked by trend-line resistance (this TL held back the previous rally attempt) at 67.825. I also have a key level at 67.80 in the way. More incidences of the African Swine fever are popping up in Asia as both South Korea and the ASF capital of the world China reported new cases of the disease. This will continue to be the top story line in my opinion going forward. This should continue to bolster demand for our pork and provide support for cash prices as packers seek product to export to customers. I continue to believe the numbers in the Hogs and Pigs report were out of line with reality. If there were an excess number of pigs out there, I do not believe packers would be so aggressive in bidding up for hogs and cutouts wouldn’t be this high. We’ll see…. Support is at 66.55, 64.80,63.325 and then 61.80. Resistance is at 67.80, the TL, 68.90 and then 69.80. (See trade idea).
The Pork Cutout Index down ticked and is at 93.98 as of 10/08/2020.
The Lean Hog Index ticked higher and is at 77.62 as of 10/07/2020.
Estimated Slaughter for Friday is 487,000 which is above last week’s 464,000 and last year’s slaughter at 486,000. Saturday slaughter is estimated at 289,000, which is above last week’s 213,000 and last year’s 257,000. The weekly estimated total is expected to be 2,730,000 which is above last week’s 2,603,000 and last year’s 2,697,000.
November Feeder Cattle once again was hammered early in the trading session as corn strength continues to worry cattle traders. It made another new low for the down move at 134.60. This broke through support at the 200 DMA (135.30), but price was able to settle above it at 135.525. The price action took price below trend-line support within a bullish Wolf Wave pattern. This is the fifth wave in the potential set-up and could lead to a rally if price trades above the Friday high (136.675) next week. Call me to discuss the possibilities for this pattern. Support is at the 200 DMA, 134.25 and then 133.50. Resistance is at 135.60, 138.95, the 100 DMA (139.02), 140.775, 142.40, the 50 DMA (142.74) and then 143.50.
The Feeder Cattle Index decreased and is at 141.92 as of 10/08/2020.
December Live Cattle continues to run in place as it yet again stayed within its month-long trading range, with the high at 113.575 and the low at 109.80. It is in the upper end of the range with the Friday high at 113.25 and the low at 112.075. It settled in the middle of the range at 112.60. Cash continues to firm with cash live cattle trading at 104.00 to 110.00 and dressed trading at 169.00 (so far) on Friday. Most of the live trades are taking place from 108.00 to 109.00. Resistance is at 113.90 and then 114.65. Support is at 112.35, 110.80, 109.60 and then 108.65.
Boxed beef cutouts were lower with choice cutouts down 1.94 to 214.06 and select down 3.28 to 199.82. The choice/ select spread widened to 14.24 and the load count was 124.
Friday’s estimated slaughter is 112,000, which is below last week’s 117,000 and last year’s 117,000. Saturday slaughter is expected to be 53,000 which is below last week’s 70,000 and last year’s 60,000. The estimated weekly total is expected to be 637,000. This is lower than last week’s 665,000 and last year’s 648,000.
The USDA report LM_Ct131 states: Thus far for Friday negotiated cash trading in the Southern Plains has been active on moderate demand. Compared to last week in the Texas Panhandle, live purchases moved 2.00 higher at 109.00. In Kansas, compared to the last reported market on Thursday, live purchases moved 1.00 higher at 109.00. In Nebraska negotiated cash trading and demand have been moderate. Compared to the last reported market on Thursday live purchases have moved steady to 1.00 higher from 108.00-109.00 and dressed purchases moved steady at 170.00. In the Western Cornbelt negotiated cash trading has been slow on light demand. Compared to the last reported market on Thursday, live purchases moved steady to 2.00 higher from 107.00-110.00. Compared to last week, dressed purchases have moved 2.00-3.00 higher at 170.00.
Hogs – Buy the June 100 call and sell the June 110/100 put spread for negative 860.
Max risk is $560.00 per contract plus commissions and fees.
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 15, 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.**
Senior Market Strategist
Walsh Trading, Inc.
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