Livestock Report

Ben DiCostanzo General Commentary Leave a Comment

                                                                                   Walsh Trading Daily Insights

Commentary

February Lean Hogs gap opened higher, traded to the session low at 70.675 and then raced to the session high at 72.00. This is just above the high of the resistance band from 71.325 to 71.85. It is also a new high for the up move yet remains below October 19 high at 72.80 when December was the lead contract. Price pulled back and consolidated the remainder of the day and settled at 71.225. This just below the low of the resistance band. It left a gap from Thursday’s high at 70.50 to the Monday low. It formed a Doji candlestick and with the gap could signal a shot-term top if Hogs gap open lower and can’t rally. Hogs ignored the crash in the cattle markets and the outside markets (Equities, Crude Oil) for now. Weakness elsewhere is probably why it consolidated after making the high. The futures rally leaves it at a stiff premium to the Lean Hog Index. Something has to give. If Hogs open lower, we may see support tested at 69.90. Support then comes in at 68.75. If settlement holds, we could see a re-test of the high and then a run to the October 10 high, which is also strong resistance.

The Pork Cutout Index jumped and is at 72.91 as of 12/31/2020.

The Lean Hog Index increased and is at 60.07 as of 12/30/2020.

Estimated Slaughter for Monday is 490,000 which is even with last week but below last year’s 497,000.

March Feeder Cattle opened lower and kept on going lower as corn strength rattled traders. It traded past support at the 100 DMA (138.91) and kept on going till it reached the session low at 135.40. This breakdown took price past the 200 DMA (135.55) on the continuous chart and also very close to a limit down move. Price limped higher and settled above the 200 DMA at 136.025. Price couldn’t rally even as corn broke down off its high. This could be troublesome for Feeder Cattle. The breakdown took price past the December 9th low at 136.575 and leaves the November 20th low at 133.00 as its next downward challenge. A breakdown below here could signal the beginning of a new downtrend. Don’t want to see that happen if you are a bull. The 200 DMA needs to provide support for Feeders to re-energize the market. A failure below the 200 DMA could send price down to test support at 134.25, 133.50 and then the November 20 low. If settlement holds resistance could be tested at 136.75 and then the 50 DMA at 137.72.

The Feeder Cattle Index dropped and is at 136.55 as of 1/1/2021.

February Live Cattle opened higher and then fell apart. It traded down to 111.50 for the session low, nearly going down limit in the process. The decline stalled at the 50 DMA which provided support at 111.43. The session high was 115.375 and settlement was at 112.30. The collapse in the Equity markets as traders suddenly decided to take profits after making a new all-time high in the S&P at 3773.25 in front of the all-important Georgia Senate run-off rattled cattle traders. Settlement was below support at 112.35 and could key trade for Tuesday. Continued pressure could see support tested at 110.80 and then should face strong support at the 100 DMA (110.31). Support then comes in at 109.60. If support holds, consolidation within the Monday range is likely.

Boxed beef cutouts were higher with choice cutouts up 0.52 to 209.87 and select up 1.56 to 196.53. The choice/ select spread narrowed to 13.34 and the load count was 102.

Monday’s estimated slaughter is 115,000, which is below last week’s 119,000 and last year’s 121,000.

The USDA report LM_Ct131 states: So far for Monday negotiated cash trading has been at a standstill in the Southern Plains and Nebraska. In the Western Cornbelt negotiated cash trading has been mostly inactive with very light demand. Not enough purchases for a market trend. Last week in the Southern Plains live purchases traded at 112.00. For the prior week in Nebraska and Western Cornbelt live purchases traded from 110.00-112.00 and dressed purchases from 175.00-176.00. In Colorado live purchases traded from 111.00-112.00. The USDA is reporting trades for live cattle from 109.00 to 110.00 for Monday (so far).

Trade Suggestion(s)

Risk/Reward

Futures N/A

Options N/A

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Ben DiCostanzo

Senior Market Strategist

Walsh Trading, Inc.

Direct: 312.957.4163

888.391.7894

Fax: 312.256.0109

bdicostanzo@walshtrading.com

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