Walsh Trading Daily Insights
Commentary
October Lean Hogs rebounded sharply on Wednesday, trading up to 89.225 and settling at 88.85. The low was at 86.75. The rally took Hogs back into the upper end of its trading range. The range is from yesterday’s 86.05 low to the high on August 20 at 89.775. October Hogs are trading 19.15 below the Lean Hog Index. This makes futures historically cheap to cash, as it is usually around 6 handles under cash at this juncture. Traders are expecting slaughter to explode and cash markets to implode creating this divergence from the norm. So far, slaughter hasn’t exploded as expected and producers seem to be current as weights are not rising as traders expected and the cash index, though declining is not crashing. We’ll see! Futures could continue to consolidate until the cash market either surges or collapses. Settlement was above resistance at 88.325 and if price can overtake the Wednesday high, a test of resistance at 90.40 is possible. A breakdown from 88.325 could see support tested at 87.10.
The Pork Cutout Index decreased and is at 116.67 as of 8/24/2021.
The Lean Hog Index was unchanged and is at 107.90 as of 8/23/2021.
Estimated Slaughter for Wednesday is 473,000, which is below last week’s 478,000 and last year’s 480,000. The estimated total for the week (so far) is 1,384,000, which is below last week’s 1,427,000 and last year’s 1,433,000.
October Feeder Cattle tried to rally early in the trading session, making the session high at 171.20 as corn was at its session lows after the re-open from the night session. A turn around in corn put the brakes on Feeder Cattle and as corn worked higher, Feeders broke down the rest of the session to the low at 169.20. It settled just above the low at 169.275. Settlement was below the key level at 169.95. A failure from settlement could see support tested at 167.125. If price can hold settlement, a re-test of resistance at 172.00 is possible. Resistance then comes in at 173.375.
The Feeder Cattle Index increased and is at 158.07 as of 8/24/2021.
October Live Cattle gap opened lower, rallied to the session high at 131.80, closing the opening gap and then broke down the rest of the session to the low at 130.25. It settled just above the low at 130.30. the breakdown took price below support at 130.45. A failure from settlement could see price breakdown to test support at the gap from 129.55 to 129.175. Support then comes in at 128.10. If futures can re-take 130.45, a test of resistance at 132.925 is possible. A break out above resistance could see price move towards resistance at 134.55.
Boxed beef cutouts were lower as choice cutouts decreased 0.69 to 346.89 and select declined 1.21 to 315.69. The choice/ select spread widened to 31.20 and the load count was 98.
Wednesday’s estimated slaughter is 117,000, which is below last week’s 120,000 and even with last year. The estimated total for the week is 353,000, which is below last week’s 360,000 and above last year’s 352,000.
The USDA report LM_Ct131 states: Thus far for Wednesday negotiated cash trading has been limited in Nebraska and mostly inactive in the Texas Panhandle and Western Cornbelt with light demand. Not enough purchases in these regions for a market trend. In Kansas negotiated cash trading has been at a standstill. 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 cash trades for live cattle from 120.00 – 130.00 and at 200.00 – 208.00 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
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