Walsh Trading Daily Insights
Commentary
December Lean Hogs pulled back from Thursday’s gains as the euphoria over the surprise large China purchase of US pork waned. Thursday saw a gap open higher to a new recent high and the Friday price action couldn’t even challenge the Thursday high as it opened lower and traded down all session. The high came in at 77.85 and the low was 76.275. Settlement was near the low at 76.55. The gap is from the Wednesday high at 76.05 to the Thursday low at 77.00. The price action on Friday closed most of the gap. The breakdown took price below support at 76.75 and the declining 21 DMA at 76.30. It settled in between the two levels. A failure below the 21 DMA could see price test support at the gap low and then 75.60. Support then comes in at 74.25. If price can hold settlement, Hogs could revisit resistance at 77.80. Resistance then comes in at 78.80.
The Pork Cutout Index increased and is at 96.19 as of 11/04/2021.
The Lean Hog Index declined and is at 78.32 as of 11/03/2021.
Estimated Slaughter for Friday is 475,000, which is above last week’s 474,000 and below last year’s 486,000. Slaughter for Saturday is expected to be 235,000, which is above last week’s 156,000 and below last year’s 255,000. The estimated slaughter for the week (so far) is 2,611,000, which is above last week’s 2,551,000 and below last year’s 2,698,000.
January Feeder Cattle opened higher, tested the 157.92 – 157.30 support area as it made the low at 157.725 then reversed course and grinded higher the rest of the session to the high at 159.80. This took price back up to resistance at the rising 100 DMA now at 159.925 which held once again with the high and then settlement below it at 159.60. Price must overcome the 100 DMA and then the 160.625 resistance level or risk pulling back to support yet again. If Feeders came overcome resistance at 160.625, a test of resistance at 162.00 is possible. A failure from settlement could see price revisit support at the 157.92 – 157.30 zone. Support then comes in at 156.075.
The Feeder Cattle Index decreased and is at 155.27 as of 11/04/2021.
December Live Cattle opened higher, made the low at 130.675 and then rallied to the session high at 131.925. It stalled and consolidated the rest of the session settling near the high at 131.80. The rally was nice to see as traders saw cash trade at 130.00 today but the futures market was stuck inside the Thursday range forming an inside candlestick. The USDA reported cash traded as high as 132.00 after the close which could embolden bulls on Monday. Slaughter for the week, however came in lower than expected at 650,000. Many were expecting another 660,000-slaughter week. If price can over take the Friday high, we could see price test the August 24th high at 132.85 when the October contract was the lead contract, resistance is next door at 132.95. A failure from settlement could see price revisit the Friday low.
Boxed beef cutouts were lower as choice cutouts decreased 0.68 to 289.54 and select decreased 0.70 to 267.52. The choice/ select spread widened to 22.02 and the load count was 101.
Friday’s estimated slaughter is 118,000, which is below last week’s 120,000 and above last year’s 111,000. Saturday slaughter is expected to be 45,000, which is below last week’s 60,000 and last year’s 59,000. The estimated total for the week (so far) is 650,000, which is below last week’s 668,000 and last year’s 652,000.
The USDA report LM_Ct131 states: So far for Friday in the Southern Plains negotiated cash trading and demand has been moderate. Compared to the last reported market on Tuesday live purchases traded 2.00 higher at 130.00. In Nebraska negotiated cash trading has been moderate on good demand. Compared to last week live purchases traded 3.00 higher at 130.00 and dressed purchases traded 4.00 higher at 204.00. In the Western Cornbelt negotiated cash trading has been slow on moderate demand. Compared to last week live purchases traded 3.00-4.00 higher at 130.00 and dressed purchases traded 4.00 higher at 204.00. A light test was noted in the Western Cornbelt.
The USDA is indicating cash trades for live cattle from 126.00 – 132.00 and from 200.00 – 206.00 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, November 11, 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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