Walsh Trading Daily Insights
October Lean Hogs gap opened higher, closed the gap making the low at 89.775 and rallied the remainder of the session to the high at 91.55. It settled near the high at 91.375. The rally took price past resistance at 90.40 and it pulled away from the rising 200 DMA now at 89.36. These levels will now become support for Hogs, in my opinion. If price can hold settlement, we could see a test of resistance at 92.375. Resistance then comes in at 93.50. A failure from settlement could see support tested. Pork cutouts continue to rally, helping to lift trader sentiment as the morning cutout report showed strength as it was up 3.05. This indicates demand remains high for pork, even at theses high prices. Packers seem to be having a difficult time finding market ready pigs to slaughter during a time when slaughter numbers are supposed to be rising and continue to increase into the fall and winter. Weights aren’t rising with the lower numbers so there must be a discrepancy in the number of market weight hogs out there and the numbers reported in the most recent quarterly Hogs and Pigs report. Most guys I talk to believe the numbers aren’t there. Packers try to use hide this so they can buy hogs cheaper but if they are going through their supplies to slaughter enough hogs, pretty soon they will have to aggressively bid up the market to get enough product to slaughter, in my opinion. This could lead to continued high cash prices going forward when historically low cash prices rule.
The Pork Cutout Index increased and is at 124.82 as of 8/02/2021.
The Lean Hog Index decreased and is at 112.04 as of 7/30/2021.
Estimated Slaughter for Tuesday is 475,000, which is above last week’s 474,000 and last year’s 465,000. Monday’s slaughter was revised lower to 408,000. The estimated total for the week (so far) 883,000, which is below last week’s 937,000 and last year’s 891,000.
September Feeder Cattle opened higher and pulled back to trade to the session low at 161.55. Price turned higher and rallied back above the key level at 162.00 to the session high at 163.825. The rally didn’t last as resistance at 163.50 again proved to be difficult to overtake. The market pulled back and settled at 162.525. Settlement was above the key level at 162.00, but must start settling above 163.50 to keep the bulls buying. A pullback below 162.00 could see price re-visit support at 160.625. Support then comes in from 157.94 – 157.30. If feeders can hold settlement, a re-test of resistance at 163.50 and the 163.825 high is possible. Resistance then comes in at 165.775. The Feeder Cattle Index continues to impress, rising to a new high as feedlots must be anticipating higher cattle prices, because they are aggressive buyers even with corn prices at high levels.
October Live Cattle opened higher and traded to the session low at 127.175. It reversed course and rallied to the session high at 128.725. It consolidated the rest of the session and settled at 128.15. Traders continue to hope for a surge in cash prices as cutout prices continue to soar taking futures above resistance at 128.10 once again. If price can hold settlement, a test of the high at 129.875 is possible. Resistance is next at 130.45. A breakdown from settlement could see price test support at 126.625. Support then comes in at 125.80.
Boxed beef cutouts were higher as choice cutouts surged 4.84 to 285.84 and select surged 4.11 to 267.49. The choice/ select spread widened to 18.35 and the load count was 130.
Tuesday’s estimated slaughter is 122,000, which is above last week’s 119,000 and last year’s 116,000. Monday’s slaughter was revised lower to 116,000. The estimated total for the week is 238,000, which is even with last week and above last year’s 228,000.
The USDA report LM_Ct131 states: Thus far for Tuesday in the Western Cornbelt and Nebraska negotiated cash trading has been limited with light demand. In the Western Cornbelt a few live purchases traded at 125.00. However, not enough purchases for a full market trend in either region. In the Western Cornbelt last week live and dressed purchases traded from 123.00-125.00 and 195.00-201.00, respectively. In Nebraska last week live and dressed purchases traded at 122.00 and 196.00, respectively. So far for Tuesday in the Southern Plains negotiated cash trading has been mostly inactive with very light demand. Not enough purchases for a market trend. Last week in the Southern Plains live purchases traded at 120.00.
The USDA is indicating cash trades this week for live cattle at 120.00 – 125.00 and 197.00 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, August 5, 2021 at3:00 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.