Walsh Trading Daily Insights
Commentary
July Lean Hogs broke out to a new high on Tuesday reaching 117.975 for the session high besting resistance at 117.20 as settlement was above it at 117.50. This continues the bullish lean, in my opinion for hogs as demand for pork continues to sizzle. Pork cutouts continue to make new highs, topping 120.00 for the third day in a row reaching 124.52 on Tuesday. The load count was a healthy 336.52. This will push the pork Cutout index higher and keeps packers aggressive in their pursuit of hogs to slaughter, in my opinion. Disease is running rampant throughout the hog world as African Swine Fever is still dominating Asia and Classical Swine fever is stifling Japan and Brazil while PRRS and PED viruses are ruling in the US. This is constraining growth in supply (even though China claims to be near pre-ASF in supply), which continues to push prices higher. The settlement above the 117.20 resistance puts resistance at 119.90 in play, in my opinion. Resistance then comes in at 122.275. A failure from 117.20 could see support tested at 115.925. Support then comes in at 114.675.
The Pork Cutout Index increased and is at 119.07 as of 5/24/2021.
The Lean Hog Index increased and is at 111.86 as of 5/21/2021.
Estimated Slaughter for Tuesday is 485,000, which is above last week’s 466,000 and last year’s slaughter of 415,000. The estimated weekly total (so far) is 967,000 which is above last week’s 944,000 and last year’s 417,000.
August Feeder Cattle broke out to a new high on Tuesday, reaching 156.95 and settling nearby at 156.675. The high is just below resistance at 157.30 and the 38% retracement of the all-time high and the April 2020 low at 157.90. This area is important in my opinion as a couple of settlements above here would put the 50% retracement at 174.66 in play. Corn collapsed, going limit down a few times in the July contract and Feeders loved that. This ignited price and is helping cash in my opinion. The Feeder Cattle Index has been rising slowly over the past week. A rally from the high could see resistance at 157.30 and 157.90 tested. Resistance then comes in at 160.625. A failure from settlement could see price test support at 155.275. Support then comes in at 154.25, 153.50 and then 152.30.
The Feeder Cattle Index increased and is at 136.31 as of 5/24/2021.
August Live Cattle eked out a new high, reaching 121.225 but couldn’t sustain it. It pulled back and settled at 120.10. Settlement keeps cattle in its consolidation zone between 120.80 resistance and 119.375 support. It is fighting to stay above the 50 (119.29) and the 100 (119.71) DMAs. The high of this consolidation is 121.225 and the low is at 118.675. Cattle needs to hold above the 121.225 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. Cutouts once again surged and once again failed to assist fat cattle prices, as live prices traded again on Tuesday extending the range lower with a 118.00 trade and the high staying the same as yesterday at 120.00. Dressed prices expanded its range to 188.00 -192.00. Packers are reaping all the benefits of the strong cutouts…. That is power. We can’t slaughter cattle so we’ll take you cattle at $$$$ and we don’t have any beef to sell but we’ll sell you beef at $$$$. They are raking it in and laughing all the way to the bank….in my opinion. What power…..
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.
Tuesday’s estimated slaughter is 121,000, which is above last week’s 120,000 and last year’s 107,000. Monday’s slaughter was revised lower to 116,000. The estimated weekly total (so far) is 237,000, which is higher than last week’s 235,000 and last year’s 113,000.
The USDA report LM_Ct131 states: Thus far for Tuesday negotiated cash trading has been slow on light demand in the Southern Plains, Nebraska, and the Western Cornbelt. A few early live purchases traded at 120.00 in the Texas Panhandle and from 119.00-120.00 in Kansas. In Nebraska, a few early live and dressed purchases have traded at 120.00 and 191.00 respectively. In the Western Cornbelt, a few early live purchases have traded at 118.00. Not enough purchases in any of these regions for a full market trend. Negotiated cash trading in Colorado has been at a standstill. 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 118.00 – 120.00 and dressed trades at 188.00 – 192.00 (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
888.391.7894
Fax: 312.256.0109
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