Walsh Trading Daily Insights
July Lean Hogs continued its descent, trading down to 108.50 for the session low and settling just above it at 108.675. The low is just above support at 107.925, which is also the May 17th low. The high was at 112.225. A breakdown below 107.925 could see support tested at 106.85 and then 104.35. a rally from settlement has resistance at 109.85 and then 111.675. China’s pork prices have collapsed as hogs are being sold as fast as farmers can sell them as they fear their pigs may catch the ASF disease which continues to infect hog populations in China. They have also raised some very large hogs which they are dumping at the same time as these lighter pigs are coming to market. Plus, they have been pressuring traders and making it known they don’t want high commodity prices. This has put pressure on hog futures even while the Lean hog Index is still near its high. With futures pressured cash is also starting to feel pressure and cutout prices, while still at extreme levels are in decline. China has also vowed to control pork prices by buying low for their reserves and selling when pork prices are too high. Volatility will be a mainstay in the hog market going forward, in my opinion.
The Pork Cutout Index decreased and is at 125.38 as of 6/17/2021.
The Lean Hog Index decreased and is at 121.68 as of 6/16/2021.
Estimated Slaughter for Friday is 470,000, which is above last week’s 457,000 and last year’s 456,000. Saturday’s slaughter is expected to be 60,000, which is above last week’s 53,000 and below last year’s 292,000. The weekly estimated slaughter is expected to be 2,443,000, which is above last week’s slaughter at 2,440,000 and below last year’s 2,593,000.
August Feeder Cattle broke down as corn prices recovered much of Thursday’s losses. Feeders will, in my opinion continue to react to the price action in the corn market as elation takes over on any decline and fear resumes when prices rise. The Feeder Cattle Index is also on traders’ minds as futures are at a premium to the index and when it gets too extreme (like it did Thursday), snapbacks could occur even on a down limit move in corn. August Feeders made the high at 157.70 and the low at 154.90. Settlement was at 155.05. August feeders stalled just above resistance at 157.30 and below the 38.2% retracement level of the all-time high (on my continuous chart) at 245.75 and the April low at 103.625 at 157.92. The low was above support at 154.25. Settlement was below the key level at 155.275. A failure from settlement could see price test support at 154.25. Support then comes in at 153.50 and 152.30. If price can bounce from 155.275, resistance could be tested at 156.075, and then the 157.30 to 153.92 area. Price will likely continue to react to changes in the price of corn.
The Feeder Cattle Index increased and is at 141.28 as of 6/16/2021. (Today’s report hasn’t arrived as I write)
August Live Cattle did very little on Friday, trading within Thursday’s trading range. It was stuck in the lower end of Thursday’s range, even with cash prices trading stronger this week. Friday’s range was 123.00 high to 121.50 low. Settlement was just above the low at 121.55. If price can rally past the Friday high, a test of resistance at 124.30 is possible. Resistance then comes in at 126.625. A breakdown from settlement could see price test support at 122.825. Support then comes in at 125.80 and 12.625. A breakdown from the low could see support tested at 120.80 and then 119.375. Cash prices are firming and packers increased slaughter levels this week. If they keep up the pace, cash prices could continue to firm. Cutouts are in decline, but are still at extreme levels.
Boxed beef cutouts decreased as choice cutouts dropped 2.97 to 323.28 and select collapsed 3.63 to 283.61. The choice/ select spread widened to 39.67 and the load count was 87.
Friday’s estimated slaughter is 117,000, which is below last week’s 119,000 and even with last year. Saturday’s slaughter is estimated to be 69,000, which is below last week’s 70,000 and above last year’s 57,000. The weekly estimated slaughter (so far) is expected to be 663,000, which is below last week’s 665,000 and above last year’s 665,000.
The USDA report LM_Ct131 states: Thus far for Friday negotiated cash trading has been limited on light demand in all major feeding regions. Not enough purchases for a full market trend. Tuesday was the last reported market in the Southern Plains, with live purchases at 122.00. In Nebraska on Tuesday and the Western Cornbelt on Wednesday, live purchases traded at 124.00 and dressed purchases traded at 195.00.
The USDA is indicating cash trades this week for live cattle from 120.00 – 125.00 and dressed trades at 192.00 – 200.00.
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, June 24, 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.**
Senior Market Strategist
Walsh Trading, Inc.
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall not be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.