Walsh Trading Daily Insights
Commentary
October Lean Hogs is now the lead contract as its volume has surpassed the volume for the August contract. It opened lower and made the session low at 91.30. It rallied and made the high at 93.40. It pulled back and settled at 92.625. The rally stalled just below resistance at 93.50, but settlement was above the key level at 92.375. If Hogs can hold settlement, a re-test of resistance at 93.50 is possible. Resistance then comes in at 95.30. A breakdown from 92.375 could see support tested at 90.40.Support then comes in at 88.325.
The Pork Cutout Index increased and is at 121.29 as of 7/22/2021.
The Lean Hog Index decreased and is at 112.25 as of 7/21/2021.
Estimated Slaughter for Friday is 434,000, which is above last week’s 427,000 and below last year’s 468,000. Saturday’s slaughter is expected to be 29,000, which is above last week’s 12,000 and below last year’s 223,000. The estimated total for the week is expected to be 2,332,000, which is above last week’s 2,280,000 and below last year’s 2,576,000.
August Feeder Cattle rallied as corn broke down to the lower end of its recent trading range. It reached a high at 160.35 and settled nearby at 160.075. The high was just below resistance at 160.625, so this is a big hurdle that must be overcome. If feeders can hold settlement, a re-test resistance 160.625 is possible. Resistance then comes in at 162.00. A breakdown from settlement could see support re-visited at the 157.30 – 157.90 key area. Support then comes in at 156.075 and then 155.275.
The Feeder Cattle Index increased and is at 152.03 as of 7/22/2021.
October Live Cattle is now the lead contract as its volume has exceeded the August volume. It opened higher and made the session low at 126.375. It reversed course and rallied to a new high for the up move at 127.625. This is just below resistance at 128.10 and this proved to be too much for the market and it pulled back to test the low of the day stopping just above it and then recovering to settle at 127.15. This is above the key level at 126.625. Traders were buying in front of the Cattle on Feed and Cattle Inventory reports that were to come out after the close on Friday. The report summaries are below. A breakdown from 126.625 could see price re-test support at 125.80 and then 124.30. If price can hold settlement, a re-test of resistance at 128.10 is possible. Resistance then comes in at 130.45.
Boxed beef cutouts were higher as choice cutouts rose 0.49 to 266.63 and select increased 0.17 to 249.94. The choice/ select spread widened to 16.69 and the load count was 131.
Friday’s estimated slaughter is 114,000, which is below last week’s 118,000 and above last year’s 111,000. Saturday’s slaughter is expected to be 71,000, which is above last week’s 56,000 and last year’s 60,000. The estimated total for the week is expected to be 652,000, which is below last week’s 653,000 and above last year’s 640,000.
Cattle on Feed
United States Cattle on Feed Down 1 Percent
Cattle and calves on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 11.3 million head on July 1, 2021. The inventory was 1 percent below July 1, 2020. The inventory included 6.98 million steers and steer calves, down 1 percent from the previous year. This group accounted for 62 percent of the total inventory. Heifers and heifer calves accounted for 4.32 million head, down 2 percent from 2020.
Placements in feedlots during June totaled 1.67 million head, 7 percent below 2020. Net placements were 1.61 million head. During June, placements of cattle and calves weighing less than 600 pounds were 345,000 head, 600-699 pounds were 260,000 head, 700-799 pounds were 375,000 head, 800-899 pounds were 405,000 head, 900-999 pounds were 195,000 head, and 1,000 pounds and greater were 90,000 head.
Marketings of fed cattle during June totaled 2.02 million head, 3 percent above 2020.
Other disappearance totaled 57,000 head during June, 8 percent below 2020.
Cattle Inventory
January 1 Cattle Inventory Down Slightly
All cattle and calves in the United States as of January 1, 2021 totaled 93.6 million head, slightly below the 93.8 million head on January 1, 2020.
All cows and heifers that have calved, at 40.6 million head, were slightly below the 40.7 million head on January 1, 2020. Beef cows, at 31.2 million head, were down 1 percent from a year ago. Milk cows, at 9.44 million head, were up 1 percent from the previous year.
All heifers 500 pounds and over as of January 1, 2021 totaled 20.0 million head, slightly below the 20.0 million head on January 1, 2020. Beef replacement heifers, at 5.81 million head, were up slightly from a year ago. Milk replacement heifers, at 4.60 million head, were down 2 percent from the previous year. Other heifers, at 9.58 million head, were 1 percent above a year earlier.
Steers weighing 500 pounds and over as of January 1, 2021 totaled 16.6 million head, up slightly from January 1, 2020.
Bulls weighing 500 pounds and over as of January 1, 2021 totaled 2.21 million head, down 1 percent from January 1, 2020.
Calves under 500 pounds as of January 1, 2021 totaled 14.2 million head, down 1 percent from January 1, 2020.
Cattle and calves on feed for the slaughter market in the United States for all feedlots totaled 14.7 million head on January 1, 2021. The inventory is up slightly from the January 1, 2020 total of 14.7 million head. Cattle on feed in feedlots with capacity of 1,000 or more head accounted for 81.4 percent of the total cattle on feed on January 1, 2021, down slightly from the previous year. The combined total of calves under 500 pounds and other heifers and steers over 500 pounds (outside of feedlots) at 25.7 million head, was slightly below January 1, 2020.
Calf Crop Down 1 Percent
The 2020 calf crop in the United States was estimated at 35.1 million head, down 1 percent from the previous year’s calf crop. Calves born during the first half of 2020 were estimated at 25.8 million head, down 1 percent from the first half of 2019. Calves born during the second half of 2020 were estimated at 9.39 million head, 27 percent of the total 2020 calf crop.
The USDA report LM_Ct131 states: Thus far for Friday in the Southern Plains and Nebraska negotiated cash trading has been at a standstill. In the Western Cornbelt negotiated cash trading has been mostly inactive on light demand. Not enough purchases for a market trend. In the Texas Panhandle on Thursday live purchases traded at 119.00. In Kansas on Wednesday live purchases traded at 119.00. In Nebraska on Thursday dressed purchases traded at 195.00 and on Wednesday live purchases traded from 122.00-123.00. In the Western Cornbelt on Thursday live and dressed purchases traded at 124.00 and 195.00, respectively.
The USDA is indicating cash trades this week for live cattle from 117.00 – 125.00 and 194.00 – 202.00 on a dressed basis (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, July 29, 2021 at 2:00 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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