Walsh Trading Daily Insights
Commentary
December Lean Hogs made an early run higher, opening strong and rallying to the session high at 70.825. The rally couldn’t be sustained however, as it reversed course and fell to the low of the day at 68.85. Settlement was near the low at 69.20. This looks bad on the surface, but the session just traded within the Tuesday range setting up (in my opinion) Thursday as a possible directional play. We have export sales due out before the open, so this could be the directional catalyst. A strong number could see price overtake the high and move towards the Monday high. A weak number could set off more profit taking and see price break down to test lower support levels. Support is at 68.75, 67.80 and then 66.55. There is trendline support at 67.125. Resistance is at 69.80, 70.80 and then 71.80.
The Pork Cutout Index increased and is at 98.41 as of 10/20/2020.
The Lean Hog Index increased and is at 78.62 as of 10/19/2020.
Estimated Slaughter for Wednesday is 492,000 which is above last week’s 489,000 and below last year’s slaughter at 493,000. The weekly total (so far) is 1,457,000, which is above last week’s 1,455,000 and below last year’s 1,470,000.
January Feeder Cattle consolidated within the upper part of the Tuesday range, making the high at 127.625 and the low at 126.075. Settlement was in positive territory at 127.075. We have an inside candlestick formation and a narrow trading range that potentially could lead to a breakout above the high or a breakdown below the low. Support is at 125.90, 122.775 and then 120.50. Resistance is at 127.575, 128.875 and then 129.65.
The Feeder Cattle Index fell and is at 138.36 as of 10/20/2020.
December Live Cattle opened higher and made a weak attempt to trade higher inching past resistance (106.025) to make the session high at 106.175. The market faded from here and traded down to the low at 104.25. It settled at 104.575. Settlement was below the 100 DMA (105.11) and above the 200DMA (103.99). Price consolidated for most of the session within the Tuesday trading range. Cash traded as low as 102.00 on a live basis and 162.00 on a dressed basis. The futures decline is putting pressure on cash prices. Support has to hold or we can see a debacle in cash prices going forward. This is a time where cash and futures normally rally with cutout prices into the holiday season. Unfortunately, with the Wuhan virus stifling the economy and with people still getting sick from the virus, we are not in normal times. The fear is real, but I still believe we will eat beef and meat in general no matter what. It will just be at home and not in restaurants. It wouldn’t surprise me to see consumers eating more meat to make some attempt to feel good about their lives. Support is at 104.20, the 200 DMA, 103.00 and then 101.625. Resistance is at 104.85, the 100 DMA, 106.025, 107.30 and then 108.65.
Boxed beef cutouts were lower with choice cutouts down 2.13 to 208.47 and select down 0.76 to 190.91. The choice/ select spread narrowed to 17.57 and the load count was 207.
Wednesday’s estimated slaughter is 121,000, which is above last last’s 119,000, and last year’s 119,000. The weekly total (so far) is 360,000 which is above last week’s 356,000 and last year’s 355,000.
The USDA report LM_Ct131 states: Thus far for Wednesday negotiated cash trading has been limited on light demand in in the Southern Plains, not enough for a full market trend. The last reported live market was on Tuesday at 106.00. In Nebraska negotiated cash trading and demand have been moderate. Compared to last week, live purchases have traded 3.00 lower from 104.00-105.00 and dressed purchases have traded 4.00- 7.00 lower from 162.00-165.00. In the Western Cornbelt negotiated cash trade has been limited on light demand. Not enough for a full market trend. Last week in the Western Cornbelt live purchases traded from 106.00-108.00 and dressed purchases traded from 167.00-169.00.
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 22, 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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