Walsh Trading Daily Insights
Commentary
June Lean Hogs is now the lead contract as its volume has overtaken the April contract. June consolidated within Thursday’s break-down candle, forming an inside candlestick. Thursday’s trade saw the high reach 102.50, which hasn’t been reached in a lead contract since September of 2014. The Thursday high also took out the high made in April of 2019 at 99.825, which was the height of the panic buying because of the African Swine Fever in China. With China screaming to anyone who would listen that they have the ASF under control and their hog population is near pre-ASF levels, price took a little breather in the futures markets. It is still way above the cash index and with the lead contract breaching 100, profit taking ensued, in my opinion. I don’t think the situation in China, Asia and Europe has changed as outbreaks continue to occur. Poland has announced a farm with almost 16,000 pigs has been infected with the virus. The entire farm will have to be depopulated according to Poland’s General Veterinary Inspectorate. German wild boar cases continue to mount and farmers are crying out for the government to do more to protect the hog producers. It I only a matter of time before it it’s the farming community, in my opinion. China also continues to report new cases of the disease, but are in denial on the severity of the destruction in its hog population. For the Chinese peoples’ sake, I hope the government is right, otherwise high prices will remain and frustration will continue to grow. The Friday range is 101.10 high and 100.00 low. Settlement is at 100.60. Settlement was above the key level at 100.075. If price can get past the Friday high, a test of resistance at 101.975 is possible. The Thursday high is nearby. Resistance then comes in at 104.35. A failure from 100.075 could see support at 98.475 tested. Support then comes in at 97.30.
The Pork Cutout Index increased and is at 101.76 as of 3/18/2021.
The Lean Hog Index increased and is at 91.24 as of 3/17/2021.
Estimated Slaughter for Friday is 485,000 which is below last week’s 489,000 and last year’s 492,000. Saturday slaughter is expected to be 78,000, which is below last week’s 128,000 and last year’s 304,000. The weekly estimated total is expected to be 2,524,000, which is below last week’s 2,578,000 and last year’s 2,799,000.
May Feeder Cattle continued its decline on Friday, trading down to 143.65 for the low of the day. It started Thursday on a positive note making a new high on the continuous chart at 151.275, then collapsed as Crude Oil crashed setting off a selling spree in most outside markets. Today’s trading saw Crude Oil and corn stage rallies, but no bounce in Feeders. The corn rally put high feed costs on the front burner and with the Feeder Cattle Index unable to show any aggressive positive price action, Feeder Cattle continued to tank. It made the high at the open at 147.25 and cruised to the low. It bounced and settled at 144.675. Settlement was below support at 145.05. If price can break out above 145.05, we could see a retracement and test resistance at 146.20. Resistance then comes in at 148.40. A failure from nearby support at 144.25 could see price test support at 143.50. Support then comes in at 142.40. With May as the lead contract, it seems focus shifted to futures being too rich for where cash was being priced according to the index. A snapback closer to cash was the result.
The Feeder Cattle Index dipped and is at 134.03 as of 3/18/2021.
June Live Cattle also followed through to the downside taking out the 118.25 low on the continuous chart when April was the lead contract. The Friday low was at 118.10. This is just a day after making at short-term high at 122.70. The high quickly gave way to heavy sell pressure and it continued on Friday. Settlement was at 118.675, which is below support at 119.375. The Friday high was 120.00. If price can trade above 119.375 (which is now resistance), a test of resistance at 120.80 is possible. Resistance then comes in at 121.90. A failure from settlement could see support tested at 117.825. Support then comes in at 116.55. Futures are way ahead of cash and cash prices have not been able to mount any kind of rally. It has been in a narrow band for several weeks and packers like it that way, in my opinion. On a positive note, at least cash prices aren’t heading lower.
Boxed beef cutouts increased as choice cutouts increased 1.38 to 229.39 and select increased 1.84 to 219.95. The choice/ select spread narrowed to 10.04 and the load count was 108.
Friday’s estimated slaughter is 106,000, which is below last week’s and last year’s 113,000. Saturday Slaughter is expected to be 65,000, which is above last week’s 53,000 and below last year’s 66,000. The weekly estimated total is expected to be 624,000, which is lower than last week’s 647,000 and last year’s 660,000.
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. In Kansas and Nebraska Wednesday was the last reported live market at 114.00. In Nebraska Thursday was the last reported dressed market at 182.00. In Colorado Thursday was the reported live market at 114.00. In the Western Cornbelt Wednesday was the last reported live market from 1014.00-115.00 and Thursday was the last reported dressed market at 182.00. Last week in the Texas Panhandle live traded at 114.00.
The range for the week (so far) is 111.00 – 116.00 for live cattle and 179.00 – 185.00 for dressed cattle.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays (except holiday weeks) and our next webinar will be on Thursday, March 25, 2021 at 3:00 pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon completion of the webinar.
**Call me for a free consultation for a marketing plan regarding your livestock needs.**
Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
Direct: 312.957.4163
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