Walsh Trading Daily Insights
Commentary
July Lean Hogs is the lead contract as its volume has over-taken the June contract’s volume. It opened lower and made the session low at 114.90. It recovered and rallied past resistance at 115.925 to the session high at 116.15. It yet again reversed course and went lower trading down to just a couple ticks off of the low. It settled near the low at 115.325. The July contract has established a new high on the continuous chart at the Monday session high. It formed a spinning top candlestick indicating indecision. Cold Storage is out and it shows frozen pork supplies up 1% from the previous month but down 26%from last year. Pork Belly supplies were down 3% from last month and down 58% from last year. I think this is bullish for hogs as it shows we are not able to replenish supplies of pork as exports and domestic demand are strong as cutout prices continue to move higher showing the strong demand on smaller supplies, in my opinion. A rally past the Monday high could see resistance tested at 117.20. Resistance then comes in at 119.90. A failure from settlement could see support tested at 114.675. Support then comes in at 112.975.
The Pork Cutout Index increased and is at 118.12 as of 5/21/2021.
The Lean Hog Index down-ticked and is at 111.43 as of 5/20/2021.
Estimated Slaughter for Monday is 482,000, which is above last week’s 478,000 and last year’s holiday slaughter of 2,000.
August Feeder Cattle opened lower and made the low at 152.825. It rallied off the low and traded to the high at 154.45. It settled at 154.125. Corn was lower and Feeders liked that. The high was just above resistance at 154.25. A rally from the high could see resistance at 155.275 tested. Resistance then comes in at 156.075 and then 157.30. A failure from settlement could see price test support at 153.50. Support then comes in at 152.30, 151.55 and then 149.975.
The Feeder Cattle Index increased and is at 135.66 as of 5/21/2021.
August Live Cattle opened lower, traded to the low at 119.475 then rallied to the high at 120.525. It settled nearby at 120.10. August Cattle is consolidating between 120.80 resistance and 119.375 support. It is fighting to stay above the 50 (119.32) and the 100 (119.65) DMAs. The high of this consolidation is 121.00 and the low is at 118.675. Cattle needs to breakout above the 121.00 high to regain solid footing or it could break down and start testing lower support levels. This then could lead to a break in cash prices. A breakdown from support at 119.375 could see support tested at 117.825. Support then comes in at 116.55 and then 114.65. If cattle can hold above settlement, a test of resistance at 120.80 is possible. Resistance then comes in at 121.90. Cash is holding up decently as cutouts continue to be strong. Packers seem to have figured out that lower slaughter levels stretches out supply and creates tightness in the beef market preventing cattle prices from moving higher and keeping beef prices high (so far). They win on both sides…. It’s great to be the middleman in this business….
Boxed beef cutouts increased as choice cutouts jumped 2.66 to 327.83 and select increased 1.08 to 303.39. The choice/ select spread widened to 24.44 and the load count was 99.
Monday’s estimated slaughter is 119,000, which is above last week’s 115,000 and last year’s holiday slaughter of 6,000.
The USDA report LM_Ct131 states: Thus far for Monday negotiated cash trading has been mostly inactive on very light demand in Nebraska and the Western Cornbelt, not enough purchases for a full market trend. Negotiated cash trading has been at a standstill in all other major feeding regions. Last week in the Texas Panhandle live purchases traded from 119.00-120.00. In Kansas last week, live purchases traded at 119.00. In Nebraska last week live and dressed purchases traded at 120.00 and from 190.00-191.00 respectively. Last week in Colorado live and dressed purchases traded at 120.00 and 191.00 respectively, on a very light test. In the Western Cornbelt last week live and dressed purchases traded at 120.00 and from 188.00-191.00 respectively.
The USDA is indicating cash trades this week for live cattle from 119.00 – 120.00 and dressed trades at 190.00 (so far).
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, May 27, 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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