Livestock Report

Ben DiCostanzo General Commentary Leave a Comment

                                                                                   Walsh Trading Daily Insights

Commentary

February Lean Hogs opened lower and made a new low at 62.75. Price surged and rallied the remainder of session. It passed Thursday’s high, reaching 65.775 and it formed a bullish outside candlestick and a bullish engulfing candle in the process. This; with a new low and could be the catalyst for a short covering rally if price can take out resistance at the downward sloping trendline at 66.25 on Monday. Resistance then comes in at 66.55. Pushing beyond here could see the November 5th high tested at 67.60.   If the trendline holds back price, we could see price revisit the low. Support is at 64.80, 63.325 and then 61.80. There was some talk that even with China’s revamping and rebuilding there Pork production complex, that they will still be large importers of port over the next 4 to 5 years.

The Pork Cutout Index declined and is at 79.28 as of 11/19/2020.

The Lean Hog Index declined and is at 68.77 as of 11/18/2020.

Estimated Slaughter for Friday is 485,000 which is above last week’s 477,000 and below last year’s 488,000. Saturday slaughter is expected to be 277,000, which is below last week’s 283,000 and last year’s 310,000. The weekly total is expected to be 2,711,000, which is above last week’s 2,683,000 and below last year’s 2,767,000.

January Feeder Cattle opened lower and broke down to a new low for the move at 133.00. This is just below support at 133.50 and the market was able to climb back above here settled at 134.60. The high for the day came in at 135.60. This is a key level and will be resistance on Monday. If price can take this out, it could see a bounce to resistance at 136.75. This could be a strong area of resistance as the 50 DMA is right there at 136.60. If price fails at settlement, we could see a retest of the Friday low. Support then comes in at 132.075.

The Feeder Cattle Index declined and is at 136.75 as of 11/19/2020.

February Live Cattle broke down to support at the 21 DMA (109.21), making the low at 109.00. It was able to bounce and it rebounded to settle at 110.65 just below resistance at 110.80. It formed a Doji candlestick which indicates indecision in the market. The high came in at 111.00. Cash prices suffered on Friday with the range from 105.00 to 109.00 so far. The cattle on feed report came out after the close and in my opinion was neutral to slightly bullish. It was mostly in line with average estimates. The highlights are at the end of the article. Slaughter numbers are excellent for this week, especially in front of a shortened kill week due to the Thanksgiving Holiday and persistent rumors that the Wuhan virus was causing slowdowns or shutdowns at various plants. Obviously, that was a lie (oops…. A false rumor). Cutouts are strong and packers continue to control all phases of the market…futures, producers and retail giving them exceptional margins. It pays to be huge with limited competition for cattle. The place where both producers and retailers need to go to sell or buy product. A simple rumor in this environment easily collapses price. Especially when people think packers should shut down when outbreaks occur. They reap all benefits. Weak futures, leading to weak cash and strong cutout prices. Nice position to be in. If futures can break out above the Friday high a test of resistance at 112.35 is possible. Resistance then comes in at 113.90 and 114.65. A failure from settlement could see support tested at 109.60 and then the rising 21 DMA.

Boxed beef cutouts were higher with choice cutouts up 1.86 to 237.70 and select up 0.27 to 213.89. The choice/ select spread widened to 23.81 and the load count was 152.

Friday’s estimated slaughter is 115,000, which is below last week’s 118,000 and last year’s 116,000. Saturday’s slaughter is expected to be 72,000 which is above last week’s 63,000 and below last year’s 79,0000. The weekly Total is 665,000, which is above last week’s 653,000 and below last year’s 668,000.

The USDA report LM_Ct131 states: Thus far for Friday in the Texas Panhandle negotiated cash trading has been at a standstill. In Kansas, Nebraska and Western Cornbelt negotiated cash trading has been mostly inactive on light demand. Not enough purchases in any feeding region for a full market trend. Wednesday was the last reported market in all regions. In the Southern Plains and Nebraska live purchases traded at 110.00 and, in Nebraska dressed purchases traded at 172.00. In the Western Cornbelt live purchases traded from 109.00-110.00 and dressed purchases traded at 172.00.

From the USDA:

Trade Suggestion(s)

Risk/Reward

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 Wednesday, November 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.

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**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

bdicostanzo@walshtrading.com

www.walshtrading.com

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