Commentary
February Lean Hogs opened lower, made the session high at 68.00 and then grinded its way down to the session low at 66.425. Tuesday’s trade took back most of Friday’s gains, forming an inside candlestick. It settled in the lower end of the range at 66.475, which is below the 66.55 support level. The settlement below support and the weak session makes it critical, in my opinion that Hogs open strong on Wednesday. An open that takes futures below the Tuesday low could see price test support at 64.80. Support then comes in at 63.325. If February Hogs can hold settlement, a retest of the Tuesday high is possible. If price can best the Tuesday high, we could see a test of resistance at 68.75. Resistance then comes in at 69.90.
The Pork Cutout Index fell and is at 79.24 as of 1/18/2021.
The Lean Hog Index ticked higher and is at 65.56 as of 1/15/2021.
Estimated Slaughter for Tuesday is 498,000 which is even with last year and above last year’s 496,000. The estimated weekly total is 925,000 which is below last week’s 996,000 and above last year’s 905,000.
March Feeder Cattle opened lower, made the session low at 135.375 and then rallied to the session high at 138.65. It couldn’t handle success however, and faded into the close to settle in the lower end of the range at 136.80. The rally took price to resistance at 138.95 and the fade took it back to support at 136.75. A failure from here could see price revisit support at 135.60 and then 134.25. If settlement holds a re-test of resistance at 138.95 is possible. Resistance then comes in at 140.775.
The Feeder Cattle Index hasn’t updated.
April Live Cattle opened higher, made the session low at 117.925 and then raced to the session high at 119.725. It consolidated the remainder of the session and settled near the high at 119.35. Settlement is just below resistance at 119.375. If futures can hold settlement, a test of resistance at 120.80 is possible. A failure from settlement could see support tested at 117.80.
Boxed beef cutouts were higher with choice cutouts up 2.45 to 217.49 and select up 0.60 to 206.44. The choice/ select spread widened to 11.05 and the load count was 148.
Tuesday’s estimated slaughter is 117,000, which is above last week’s 115,000 and below last year’s 124,000. The estimated weekly slaughter (so far) is 229,000, which is below last week’s 231,000 and last year’s 245,000.
The USDA report LM_Ct131 states: Thus far For Tuesday negotiated cash trading has been at standstill in Kansas and Northern Plains. In the Texas Panhandle and Western Cornbelt negotiated cash trading has been very limited with very light demand. In the Western Cornbelt a few live purchases traded at 105.00. However, not enough purchases for a full market trend. Last week in the Texas Panhandle live purchases traded from 110.00-111.00. For the prior week in Kansas live purchases traded from 109.00-111.00. For previous week in Nebraska live and dressed purchases traded from 109.-110.00 and 172.00-174.00, respectively. Last week in Colorado live purchases traded at 109.00. For prior week in the Western Cornbelt live and dressed purchases traded from 108.00-109.00 and at 173.00, respectively.
The USDA is reporting trades for live cattle from 105.00 – 110.50 and no dressed cattle so far for the 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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