Walsh Trading Daily Insights
Commentary
December Lean Hogs opened lower, made the early low and rallied to the session high at 73.825 and once again reversed course to trade down to the session low at 72.525. It settled near the low at 72.575. Hog futures are struggling as cash and cutout prices continue to make their way lower creating pessimism in the futures markets. Traders see packers are able to buy needed supply at lower prices each day and at the same time losing the ability to keep cutout values moving in their favor. Weights have been increasing which may indicate supply is backing up. This has created some volatility in futures prices as they make their way lower. Traders are also worried about export sales as they have been erratic lately and losing some luster as China’s needs have dwindled. The market has become too reliant on seeing China in the market as they are not normal buyers of US pork historically so you have to look at any involvement by China as a bonus to the US. We have to continually market our pork to any and all potential customers and not rely on China to help us out. They won’t… They will be in the market when pork is deemed cheap enough to buy and they have a need to fulfill. With the liquidation of their herd over the past 6 months or so as their pork prices have collapsed, the USDA is anticipating China to increase their imports next year. Staying out of our market will likely cost them as our producers have reduced our herd and it looks like prices will strengthen into next year in my opinion. Hogs settled below support at 72.80 any continued breakdown could see support tested at 71.85 – 71.325. Support then comes in at 69.90. If price can rebound from settlement, we could see price attempt to test resistance at 74.25.
The Pork Cutout Index decreased and is at 97.46 as of 10/25/2021.
The Lean Hog Index decreased and is at 82.98 as of 10/22/2021.
Estimated Slaughter for Tuesday is 480,000, which is above last week’s 478,000 and below last year’s 498,000. The estimated slaughter for the week (so far) is 958,000, which is above last week’s 950,0000 and below last year’s 985,000.
Feeder Cattle opened lower, made the low at 158.275 and then reversed course and rallied the rest of the session, making the high at the end of the day at 160.75. It settled near the high at 160.60. Traders reversed yesterday’s price action as a good night’s sleep saw traders renew their faith in the bullish cattle on feed report. The rebound took price past resistance at 160.625 and settlement is right at this level. If price can hold settlement, we could see a test of resistance at 162.00. Resistance then comes in at 163.50. A failure from settlement could see price test support at the rising 100 DMA at 159.475 and then the 21 DMA at 158.85. Support then comes in at the 157.92 – 157.30 support zone.
The Feeder Cattle Index decreased and is at 155.50 as of 10/25/2021.
December Live Cattle opened lower and made the session low at 129.20. Bulls took over the market and price rallied the rest of the session to the high at 131.625. It settled near the high at 131.45. This is a new high for the December contract since taking over as the lead contract and it puts resistance at 132.95 back in play. Slaughter expectations for the week and going have shifted to higher levels which would give producers more pricing power in my opinion. Slaughter is expected to range from 660,000 to a nice 670,000 this week as packers and retailers prepare for the upcoming holiday season. Slaughter for November is now expected to stay in this range. If it does packers will have to acquire more cattle on a weekly basis in my opinion. If price can hold settlement, we could get closer to resistance at 132.95. A failure from settlement could see price test support at 130.45..
Boxed beef cutouts were mixed as choice cutouts increased 1.72 to 284.76 and select decreased 0.65 to 262.54. The choice/ select spread widened to 22.22 and the load count was 136.
Tuesday’s estimated slaughter is 122,000, which is above last week’s 121,000 and last year’s 119,000. The estimated total for the week (so far) is 244,000, which is above last weeks 241,000 and last year’s 235,000.
The USDA report LM_Ct131 states: So far for Tuesday in the Texas Panhandle negotiated cash trading has been slow with light demand. Compared to last week live purchases traded steady at 124.00, with a few at 125.00. In Nebraska negotiated cash trading has been mostly inactive on light demand. Not enough purchases for a market trend. In Kansas and Western Cornbelt negotiated cash trading has been at a standstill. Last week in Kansas live purchases traded at 124.00. For the prior week in Nebraska and Western Cornbelt live and dressed purchases traded from 124.00-125.00 and at 196.00, respectively.
The USDA is indicating cash trades for live cattle from 124.00 – 126.00 and nothing 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 28, 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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