Walsh Trading Daily Insights
February Lean Hogs continued on its downward trek, trading past support at 77.80 to the session low at 77.55. It was able to bounce back a touch and settled just above support at 77.85. The high came in at 78.50. Lower slaughter levels due to the worker shortages continue due to the expanding wave of the Covid virus and the disappointing performance of cutouts have put some pressure on Hogs, in my opinion. There is also uncertainty due to the Prop 12 law in California. Will exports continue to impress? The US has come to an agreement with India to allow US pork to be imported is a potential windfall for the pork industry. India is the second most populous nation on the planet and it imports a negligible amount of pork from the US. There is a lot of potential and could offset some of the loss from China’s pullback in imports. A failure from settlement could see price test support at 76.75. If settlement holds, we could test resistance at 78.80.
The Pork Cutout Index ticked higher and is at 86.68 as of 1/10/2022.
The Lean Hog Index increased and is at 74.70 as of 1/07/2022.
Estimated Slaughter for Tuesday is 458,000, which is below last week’s 467,000 and last year’s 500,000. Monday’s slaughter was revised lower to 448,000. The weekly estimated total is 906,000, which is below last week’s 925,000 and last year’s 998,000. (So far)
March Feeder Cattle bounced back in solid fashion after breaking down below support at the 21 DMA (165.40). It made the low at early in the session at 164.725 and then surged to the high at 167.225. This was just above resistance at 167.15 and this proved to be too much as the Feeders consolidated the rest of the session and settled at 166.35. Feeders has spent the past 5 days basically consolidating between these two levels. If settlement holds, we could see a re-test of resistance at 167.15. A breakout above here could see price challenge resistance at the gap from 168.50 – 169.225. A failure from settlement could see price revisit support at the 21 DMA.
April Live Cattle is now the lead contract as its volume has overtaken the volume in the February contract. It puts cattle back in the upper region of its trading range and its high for the session ticked above the November 29 high of 141.85; reaching 141.875. This is positive in my opinion going forward for the cattle market. The low came in at 140.025 and settlement was at 141.20. Resistance is at 142.25 and support is at 140.175. A failure from settlement could see price re-test support at 140.175. If cattle can hold settlement, we could see a test of resistance at 142.25.
Boxed beef cutouts were higher as choice cutouts increased 2.18 to 278.22 and select increased 2.13 to 268.63. The choice/ select spread widened to 9.59 and the load count was 150.
Tuesday’s estimated slaughter is 114,000, which is below last week’s 117,000 and last year’s 116,000. The estimated total for the week is 227,000, which is above last week’s 224,000 and below last year’s 232,000. ( So far)
The USDA report LM_Ct131 states: Thus far Tuesday negotiated cash trade was very limited on light demand in the Texas Panhandle and Kansas. Compared to last week in the Texas Panhandle a limited amount of early live purchases traded most 1.00 lower at 137.00. Compared to last week in Kansas a limited amount of early live purchases traded most 1.00-3.00 lower from 135.00-137.00. Trade was mostly inactive on light demand in all other feeding regions. For the prior week in Nebraska and Western Cornbelt live and dressed purchases traded from 138.00-140.00 and at 220.00, respectively.
The USDA is indicating cash trades for live cattle from 134.00 – 137.00 and at 217.00 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, January 13, 2022 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.**
Senior Market Strategist
Walsh Trading, Inc.
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