Livestock Report

Ben DiCostanzo General Commentary Leave a Comment

                                                                                   Walsh Trading Daily Insights

Commentary

February Lean Hogs opened at the session high and then made its way down to the session low. The low came in at 70.10 which is just above the 69.90 support level. The breakdown closed the gap created from the previous two sessions high and low. Price was able to recoup some of its decline and settled at 70.925. This is just below the resistance band from 71.325 to 71.85. Futures are at a stiff premium to the Lean Hog Index. Something has to give. If Hogs open lower, we may see support re-tested at 69.90. Support then comes in at 68.75. If settlement holds, we could see a re-test of the Monday high (72.00) and then a run to the October 10 high (72.80), which is also strong resistance.

The Pork Cutout Index jumped and is at 74.25 as of 1/4/2021.

The Lean Hog Index increased and is at 60.62 as of 12/31/2020.

Estimated Slaughter for Tuesday is 489,000 which is above last week’s 451,000 but below last year’s 497,000. The estimated weekly total (so far) is 979,000 which is above last week’s 941,00 and below last year’s 994,000.

March Feeder Cattle opened lower and traded down past support at the 200 DMA (135.65) to the session low at 134.85. It didn’t stay down for too long as price recovered and raced to the session high at 138.75. Traders were able to look past the continued corn rally even as corn neared the $5.00 level, making the high at 4.96. The 200 DMA was able to provide support for Feeders and it led to a re-test of the 100 DMA, now at 138.80. Feeders fell back off the high and settled at 137.425. In fact, settlement was also below the 50 DMA, now at 137.95. I think the ability of the Live Cattle market to rally supported the Feeder Cattle market. Could we be in for some consolidation between the 100 DMA on the upside and the 200 DMA on the downside? A failure from settlement could send price down to re-test the rising 200 DMA. 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 the 50 DMA, the declining 100 DMA and then 138.95. Resistance then comes in at 140.775.

The Feeder Cattle Index dropped and is at 136.55 as of 1/1/2021. (not updated as I publish article).

February Live Cattle opened higher and then traded down to the session low at 111.35. The decline stalled once again just below the rising 50 DMA which provided support at 111.66. Traders used the 50 DMA as a spring-board with price rallying past the Monday high to 115.50. The Tuesday low was below the Monday low, so we get an outside range day in the process. Settlement was near the high at 115.05. This indicates strength. Trding above the Tuesday high could see price test resistance at 116.55. Resistance then comes in at 117.80 and 119.15. A failure from settlement could see price re-test support at 114.65, 113.90 and then 112.35.

Boxed beef cutouts were lower with choice cutouts down 3.97 to 205.90 and select down 0.04 to 196.49. The choice/ select spread narrowed to 9.41 and the load count was 204.

Tuesday’s estimated slaughter is 118,000, which is above last week’s 116,000 and below last year’s 123,000. Monday’s slaughter was revised lower to 112,000. The estimated weekly slaughter is 230,000 (so far), this is below last week’s 235,000 and last year’s 244,000.

The USDA report LM_Ct131 states: Thus far for Tuesday negotiated cash trading has been at a standstill in the Southern and Northern Plains. In the Western Cornbelt negotiated cash trading has been mostly inactive on 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 last week live purchases traded from 111.00-112.00.

The USDA is reporting trades for live cattle from 109.00 to 112.00 and dressed cattle at 175.00 for the week (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.

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