Walsh Trading Daily Insights
Commentary
December Lean Hogs gap opened lower and broke down to the session low at 79.425. The breakdown to the low saw price dip into the gap created from the break out rally from September 27th. The gap high is September 27th low at 79.75 to the September 24th high at 77.20. Buying came in at the low and took price on run to the session high at 81.15. The rally narrowed the opening downward gap which is now established at the Friday low at 81.425 and the Monday high. It settled at 80.175. There seems to be lots of confusion in the hog market as the swings in price have been volatile. The hog supply is in decline but the seasonality indicates sufficient supply as cash hog price have been dropping and cutout prices have been volatile. This has led to the erratic price action in the futures market, in my opinion. With rally gaps and now a decline gap, traders’ emotions have been all over the place trying to get a handle on where price should be going. If settlement holds, we could see a test of the gap established by Monday’s price action. Resistance is at the high of the gap at 81.425. A failure from settlement could see price dip deeper into the September 24th to the 27th gap. Support is at 78.80, 77,80 and then the gap low at 77.20.
The Pork Cutout Index decreased and is at 110.56 as of 10/08/2021.
The Lean Hog Index decreased and is at 91.95 as of 10/07/2021.
Estimated Slaughter for Monday is 477,000, which is above last week’s 464,000 and last year’s 474,000.
November Feeder Cattle consolidated between resistance at 162.00 and support at 160.625, making the high just below resistance at 161.95 and the low just below support at 160.60. It settled at 161.725. It was a slow trading session and traders are waiting to see if cash can catch up to the futures. In my opinion, traders believe we will see more competition for acquiring feeder cattle down the road as the drought has caused more slaughter of beef cows and after this year, we could see smaller numbers heading to feedlots, creating more competition for cattle. This hasn’t helped the near-term supply situation as there are plenty of cattle for sale. The thinking there will be less cattle out there in the future and the supply situation now is creating volatility in cash prices. A rally past resistance at 162.00 could see price test the 163.50 resistance level. If price can’t hold settlement, we could revisit support at 160.625. Support then comes in at the rising 100 DMA now at 158.65.
The Feeder Cattle Index decreased and is at 153.62 as of 10/08/2021.
December Live Cattle is now consolidating in the upper end of its 130.60 – 125.00 trading range. Monday’s trading range was a tight 130.425 – 129.75. Settlement was at 130.175. Cash trade will likely develop later in the week and traders are hopeful we will start to see higher prices and better slaughter numbers from here on out, in my opinion. A failure from settlement could see a pullback to support at 128.10. If price can hold overtake the range high, a move toward resistance at 132.95 is possible.
Boxed beef cutouts were mixed as choice cutouts decreased 2.15 to 281.12 and select increased 0.90 to 263.64. The choice/ select spread narrowed to 17.48 and the load count was 107.
Monday’s estimated slaughter is 121,000, which is above last week’s 120,000 and last year’s 118,000.
The USDA report LM_Ct131 states: Thus far for Monday negotiated cash trading has been at a standstill in all major feeding regions. Last week in the Southern Plains live purchases traded at 124.00. For the prior week in Nebraska live and dressed purchases traded from 122.00-124.00 and at 196.00, respectively. For previous week in the Western Cornbelt live and dressed purchases traded at 122.00 and from 193.00-196.00, respectively.
The USDA is indicating no cash trades for live cattle and 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, October 14, 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
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.