Walsh Trading Daily Insights
Commentary
April Lean Hogs gap opened higher, down-ticked to the session low at 92.00 and then raced to the session high at 93.125. It consolidated the remainder of the session and settled at 92.90. The high is a new high for the up-move and is now at levels last seen in May of 2019 for the lead contract. Fundamentals are leading the charge as cutout and cash prices continue to soar. In my opinion, the higher cutout and cash prices along with the lower slaughter numbers are showing the US may not have as many hogs as the USDA has indicated. With demand strong, packers and retailers must be aggressive in securing product. I think the Chinese government has made a huge mistake in declaring their disease problems are over with. That they are close to normal production so they will not be buying as much pork from outside sources. Producers have cut back or gone out of business as the pandemic and higher feed costs were too much for many of them. Why hold on when restaurants are shut down, workers are hard to come by and your biggest customer says they are all good and won’t need your product any way. Big mistake… Big mistake China. Now, in my opinion China will have to pay the piper. The African Swine Fever and other disease continues to dominate the Chinese landscape and will be around for quite a while. Russia has had the disease for years and can’t get rid of it. How long wnd how much higher does price have to go before we see demand rationing? The rally took price past resistance at 92.375. The high was just below resistance at 93.50. If price can get past 93.50, a test of resistance at 95.30 is possible. A failure from settlement could see support at 92.375 tested. Support then comes in at March 11 high at 91.70 and 90.40. There is a gap from Monday’s high at 90.90 and Tuesday’s low at 92.00.
The Pork Cutout Index increased and is at 98.86 as of 3/15/2021.
The Lean Hog Index increased and is at 89.35 as of 3/12/2021.
Estimated Slaughter for Tuesday is 493,000 which is above last week’s 484,000 and below last year’s 502,000. Monday’s slaughter was revised lower to 482,000. The weekly estimated total is 975,000, which is above last week’s 973,000 and below last year’s 995,000.
May Feeder Cattle is now the lead contract as its volume has overtaken the April contract’s volume. It had an inauspicious start as not much took place in the May contract, trading in a narrow range and creating a Doji candlestick in the process. It made the high at 150.175 and the low at 149.30. Settlement was in the middle of the range at 149.175. Settlement was below resistance at 149.975. If price can break out above 149.975, we could see resistance tested at 151.55. Resistance then comes in at 152.30. A failure from settlement could see price test support at 148.30. Support then comes in at 147.30.
The Feeder Cattle Index down-ticked and is at 133.86 as of 3/15/2021.
June Live Cattle traded within Monday’s trading range, forming an inside candlestick. The high was at 121.825 and the low at 120.70. It settled at 121.45. Settlement is just below resistance at 121.90 on the continuous chart. If price can trade above resistance, a test of resistance at 122.825 is possible. Resistance then comes in at 124.30. A failure from settlement could see support re-tested at 120.80. Support then comes in at 119.375. Cash market has yet to trade this week so maybe traders are in wait and see mode. We need to start seeing some strength in the cash market.
Boxed beef cutouts increased as choice cutouts jumped 2.16 to 226.93 and select increased 0.72 to 218.77. The choice/ select spread widened to 8.16 and the load count was 132.
Tuesday’s estimated slaughter is 121,000, which is even with last week and below last year’s 123,000. Monday’s slaughter was revised lower to 107,000. The weekly estimated total (so far) is 228,000, which is lower than last week’s 242,000 and last year’s 241,000.
The USDA report LM_Ct131 states: So far for Tuesday negotiated cash trading has been at a standstill in the Southern and Northern Plains. In the Western Cornbelt negotiated cash trading was mostly inactive on very light demand. Not enough purchases for a market trend. Last week in the Southern Plains and Colorado live purchases traded at 114.00. In Nebraska live and dressed purchases trading from 113.00-114.00 and at 180.00, respectively. In the Western Cornbelt live and dressed purchases traded from 112.00- 113.00 and 178.00-180.00, respectively.
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Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
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