Walsh Trading Daily Insights
Commentary
October Lean Hogs tried to rally early in the trading session, reaching the high at 89.45 then breaking down and trading lower the rest of the session to the low at 86.975. It settled at 87.475. Hogs were trying to move higher early, as cattle markets were strong, but a drop in the morning cutout report sent futures in a downward spiral that it couldn’t recover from. The early rally wasn’t able to overtake the Friday high and the decline took price below support at 87.10 before settling above it. If price can hold settlement, a test of resistance at 88.325 is possible. The Friday high is next at 89.775. A breakdown from 87.10 could see support tested at 85.325.
The Pork Cutout Index decreased and is at 119.65 as of 8/20/2021.
The Lean Hog Index decreased and is at 107.56 as of 8/19/2021.
Estimated Slaughter for Monday is 456,000, which is below last week’s 477,000 and last year’s 470,000. Friday’s slaughter was revised lower to 460,000, which lowered the final estimate to 2,445,000.
Cold Storage – Frozen pork supplies were up slightly from the previous month but down 4 percent from last year. Stocks of pork bellies were down 24 percent from last month and down 35 percent from last year.
October Feeder Cattle is now the lead contract as its volume has overtaken the September contract. It surged and broke the 170.00 barrier, trading up to 172.475 and then pulling back to settle at 170.675. Settlement was above this psychological barrier and puts 174.69 in the crosshairs. This is the 50% retracement of the all-time high at 245.75 and the April 2020 low at 103.625. A failure to hold settlement could see support tested at 169.995 and then 167.125.
The Feeder Cattle Index ticked lower and is at 155.73 as of 8/20/2021.
October Live Cattle gap opened higher and never looked back, surging to a new high breaking out of its trading range in spectacular fashion. (In my opinion). The surge took price past resistance at 130.45 to the session high at 132.625. The high is just below resistance at 132.925 and settlement was at 131.95. Strong slaughter levels last week have traders thinking packers are going to continue this pace and will have to be more aggressive securing cattle and therefore giving more pricing power to producers. Plus, the Cattle on Feed report was slightly bullish giving futures another shot in the arm. If futures can hold settlement a test of resistance at 132.925 is possible. A break out above resistance could see price move towards resistance at 134.55. A failure from settlement could see price breakdown to support at 130.45. Support then comes in at 128.10.
Boxed beef cutouts were higher as choice cutouts increased 2.97 to 348.03 and select increased 0.87 to 319.40. The choice/ select spread widened to 28.63 and the load count was 83.
Monday’s estimated slaughter is 120,000, which is above last week’s 119,000 and last year’s 116,000.
Cold Storage – Total pounds of beef in freezers were down slightly from the previous month and down 9 percent from last year.
The USDA report LM_Ct131 states: Thus far for Monday in the Southern Plains negotiated cash trading has been at a standstill. In Nebraska and Western Cornbelt negotiated cash trading has been mostly inactive on very light demand. Not enough purchases for a market trend in either region. Last week in the Texas Panhandle live purchases traded from 121.00-122.00. In Kansas last week live purchases traded at 122.00. In Nebraska for the prior week live and dressed purchases traded from 125.00-127.00 and at 200.00, respectively. In the Western Cornbelt for the previous week live and dressed purchases traded at 127.00 and from 200.00-205.00, respectively.
The USDA is indicating no cash trades for live cattle and at 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, August 26, 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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