Commentary
February Lean Hogs gap opened lower and tanked. It traded down to support at 64.80, making the low just below it at 64.60. It held support and nearly came all the way back, leaving a tiny gap form Thursday’s low at 66.725 and the Friday high at 66.70. It settled just under the high at 66.575. Settlement was a tick higher than the key level at 66.55 and it formed a hammer candlestick. A strong open on Monday could see some retracement of the near-term decline. If price can hold settlement, we could see a test of resistance at 67.80. Resistance then comes in at 68.75 and 69.90. A failure below settlement could see support revisited at 64.80.
The Pork Cutout Index declined and is at 78.42 as of 12/3/2020.
The Lean Hog Index dipped and is at 66.55 as of 12/2/2020.
Estimated Slaughter for Friday is 491,000 which is above last week’s 480,000 and above last year’s 488,000. Saturday’s slaughter is expected to be 331,000, which is below last week’s 380,000 and above last year’s 330,000. The weekly estimate is expected to be 2,789,000, which is above last week’s 2,350,000 and below last year’s 2,804,000.
January Feeder Cattle opened lower and broke down to test support at 138.95, making the low at 138.40. It recovered and traded to the session high at 140.125. It dipped and settled at 139.775. It opened below and settled above the 100 DMA (139.64). It formed a Doji candlestick. This indicates indecision. Price is trying to decide whether it belongs above the 100 DMA or below it. If price can hold the 100 DMA on Monday it could revisit resistance at 140.775. Resistance then comes in at 142.40. A failure to hold the 100 DMA could see price re-test support at 138.95. Support then comes in at 136.75.
The Feeder Cattle Index declined and is at 139.18 as of 12/3/2020.
February Live Cattle opened lower and broke down to the session low at 111.15. It dipped into the gap created from the November 20 high at 111.00 and the November 23 low at 111.175. Gap buyers came into the market and price rallied to the session high at 112.525. It settled nearby at 112.40. This kept price above support at 112.35. This kept price in the middle of the consolidation range the February contact has been trading within since it became the lead contract. The range is from 109.00 (low) to the 114.70 (high). It formed a Doji candlestick. A rally above the high could see price recover and test resistance at 113.90. Resistance then comes in at 114.65. A break down below 112.35 could see the gap re-visited. Support then comes in at 110.80 and 109.60.
Boxed beef cutouts were lower with choice cutouts down 4.17 to 235.02 and select down 2.42 to 217.51. The choice/ select spread narrowed to 17.51 and the load count was 132.
Friday’s estimated slaughter is 117,000, which is above last week’s 115,000 and below last year’s 122,000. Saturday’s slaughter is expected to be 69,000, which is below last week’s 88,000 and last year’s 80,000. The weekly estimate is expected to be 667,000, which is above last week’s 564,000 and below last year’s 682,000.
The USDA report LM_Ct131 states: Thus far for Friday negotiated cash trading has been mostly inactive on light demand in all major feeding regions. Not enough purchases in any region for a full market trend. The last reported market in Texas was on Wednesday with live purchases from 110.00-112.00. In Kansas, the last reported market was on Thursday with live purchases at 110.00. In Nebraska on Wednesday, live and dressed purchases traded from 109.00-110.00 and 172.00-174.00 respectfully. In the Western Cornbelt on Wednesday live and dressed purchases traded at 109.00 and 172.00 respectfully.
The USDA is reporting live trades from 106.00 – 112.00 and dressed from 170.00 – 178.50 (so far this week).
Trade Suggestion(s)
Risk/Reward
Futures N/A
Options N/A
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Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
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