Walsh Trading Daily Insights
Commentary
April Lean Hogs opened higher, made the low at 95.575 and raced to the session high at 97.375. It pulled back then rallied into the close settling near the high at 97.25. The rally continues with the April Hogs, as the Tuesday session made a new high for the up move, stopping just above resistance at 97.30 and settling just below it. It is getting extended in relation to the Lean Hog Index as the futures settlement price is a whopping 18.93 points above the index. Traders see slaughter levels lower due to the virus and weights so far are not racing higher. The belief is the numbers aren’t there and once slaughter climbs, producers will need to be more aggressive in making purchases, so the cash market will likely climb going forward. Demand remains high as consumers are eating pork domestically and our exports have started the year in strong, in my opinion. A failure from settlement could see price test support at 95.30. A breakout above 97.30, could see price test at 98.475.
The Pork Cutout Index increased and is at 92.87 as of 1/24/2022.
The Lean Hog Index increased and is at 78.32 as of 1/25/2022.
Estimated Slaughter for Tuesday is 476,000, which is above last week’s 468,000 and last year’s 449,000. Monday’s slaughter was revised lower to 448,000. The weekly estimated total is 924,000, which is above last week’s 863,000 and below last year’s 938,000.
March Feeder Cattle opened lower and made the session high at 161.25 in the opening 5 minutes. It broke down and traded to the session low at 158.65, coming back to the middle of the range and settled at 159.85. It formed an inside candlestick as the Tuesday range was within the previous day’s range. The breakdown took price down to the rising 200 DMA (continuous chart) now at 158.80 for the second day in a row, with the long-term holding once again. If this fails, look out below in my opinion. A failure from settlement could see price re-test support at the 200 DMA. Support then comes in at 157.30. If settlement holds, we could see a test of resistance at 160.625. Resistance then comes in at the declining 100 DMA at 161.425 and then 162.00. There is a gap from the Monday high at 162.05 to the Friday low 163.15.
The Feeder Cattle Index decreased and is at 159.77 as of 1/24/2022.
April Live Cattle consolidated within Monday’s breakdown candle, with the Tuesday trading range high at 140.50 to the low at 139.375. The high was made at the open and the low came in a half hour later. Cattle consolidated the rest of the session and settled near the high at 140.10. Settlement was just below the key level at 140.175. Monday’s breakdown left a gap from the High at 141.35 to the Friday low at 142.025. Slaughter improved on Tuesday to a 118,000, but it is still below the expected 120,000 and this needs to keep climbing as weights are not declining as expected creating a problem for producers in my opinion. With cutouts strong, packers are sitting on easy street and with feed prices strong, producers are feeling the pain, in my opinion. Resistance ais at the gap and support is at the rising 50 DMA now at 138.75 and then 138.60.
Boxed beef cutouts were lower as choice cutouts decreased 1.12 to 292.38 and select decreased 1.47 to 283.32. The choice/ select spread widened to 9.06 and the load count was 143.
Tuesday’s estimated slaughter is 118,000, which is above last weeks and last year’s 117,000. The estimated total for the week is 233,000, which is above last week’s 230,000 and is even with last year.
The USDA report LM_Ct131 states: So far for Tuesday negotiated cash trading has been slow on light demand in the Southern Plains, Nebraska and Western Cornbelt. In the Southern Plains a few live purchases traded at 137.00. In Nebraska a few live and dressed purchases traded at 137.00 and 218.00, respectively. In the Western Cornbelt a few dressed purchases traded at 218.00. However, not enough purchases for a market trend in any region. Last week in the Southern Plains live purchases traded at 137.00. In Nebraska for the prior week live and dressed purchases traded from 137.00-138.00 and at 218.00, respectively. In the Western Cornbelt for the previous week live and dressed purchases traded from 137.00-139.00 and at 218.00, respectively.
The USDA is indicating cash trades for live cattle from 135.00 – 137.00 and from 217.00 – 218.00 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 27, 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.**
Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
Direct: 312.957.4163
888.391.7894
Fax: 312.256.0109
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