Walsh Trading Daily Insights
Commentary
October Lean Hogs opened steady and rallied past resistance at 93.50 to the session high at 94.05. The positive price action was fleeting, however as it reversed course and traded lower the rest of the session, trading below support at 92.375 to the low of the day at 92.225. It was able reclaim support, settling above it at 92.525. The cash market remains strong as cutouts and the cash market were higher early in the session, but traders seem reluctant to push prices aggressively higher as fear of higher slaughter numbers and a resulting lower cash market dominate their thoughts, in my opinion. Demand remains strong for pork despite higher cutout prices and in my opinion slaughter numbers are not climbing. 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 121.95 as of 7/26/2021.
The Lean Hog Index decreased and is at 112.22 as of 7/23/2021.
Estimated Slaughter for Tuesday is 474,000, which is above last week’s 469,000 and last year’s 474,000. Monday’s slaughter was revised lower to 463,000. The estimated total for the week (so far) is 937,000, which is above last week’s 926,000 and last year’s 930,000.
September Feeder Cattle has replaced the August contract as the lead contract. Its volume is now higher than the August volume. It opened lower and rallied to the session high at 165.30. It didn’t stay up there for long as corn was strong early and price couldn’t overtake resistance at 165.775 and it pulled back to trade down to the low at 163.65. It settled at 164.00. With September now the lead, it looked as if (in my opinion) traders re-evaluated the price level September was at and deemed it to stretched from where the cash index is and it snapped back in response. Settlement and the low were above the key level at 163.50, but the candle is bearish in that it is a shooting star formation in an uptrend on the continuous chart. A breakdown from support at 163.50 could see support tested at 162.00. Support then comes in at 160.625. If feeders can hold settlement, a re-test of resistance at 165.775 is possible.
The Feeder Cattle Index increased and is at 153.97 as of 7/26/2021.
October Live Cattle opened lower and rallied to a new high for the up move. It made the high at 129.875, unable to challenge resistance at 130.45 as selling took over and took price down to the session low at 128.025. Once again with cash prices well below the futures price, the snapback to the cash took futures down. The low was below support at 128.10 but it was able to settle above it at 128.2425. The price action resulted in a reversal candle as settlement was below the open and the high after making a new high in an uptrend. If cash can’t move higher, we could see price pull back in response. A breakdown from settlement could see price test support at 126.625. If settlement holds we could see a test of the Tuesday high and if we can take that out… resistance at 130.45 is next.
Boxed beef cutouts were higher as choice cutouts rose 1.80 to 269.73 and select increased 3.02 to 253.94. The choice/ select spread narrowed to 15.79 and the load count was 157.
Tuesday’s estimated slaughter is 119,000, which is above last week’s 117,000 and even with last year. The estimated total for the week (so far) is 238,000, which is above last week’s 232,000 and last year’s 236,000.
The USDA report LM_Ct131 states: Thus far for Tuesday negotiated cash trading has been mostly inactive on light demand in Nebraska and the Western Cornbelt. Not enough purchases in either region for a full market trend. Negotiated cash trading has been at a standstill in all other major feeding regions. Last week in the Southern Plains live purchases traded at 119.00. In Nebraska last week live and dressed purchases traded from 120.00-123.00 and at 195.00, respectively. In the Western Cornbelt last week live and dressed purchases traded from 120.00-124.00 and from 195.00-202.00, respectively.
The USDA is indicating cash trades this week for live cattle from 119.00 – 125.00 and 195.00 – 200.00 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
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.