Walsh Trading Daily Insights
Commentary
April Lean Hogs opened lower, eked out a new high for the up move and then fell back as profit taking took over in the Hogs, taking out the Tuesday low in the process. This formed an outside day down candlestick which in my opinion could lead to further selling if the Wednesday low is taken out. The new high is at 97.50 and the Wednesday low came in at 95.55. Settlement came in at 96.45. The price action basically kept price within the 97.30 to 95.30 support/ resistance band as price consolidated the rest of the session after making the high and the low. I think traders took some profits as the rally is somewhat extended and exports are out Thursday before the open and the quick failure of futures after making the high scared traders. Futures are extremely high compared to the cash index historically, in my opinion and weaker exports could lead to more selling. A failure from 95.30 could see price test support at 93.50. If settlement holds, we could see price re-test resistance at 97.30. A breakout above 97.30, could see price test resistance at 98.475.
The Pork Cutout Index increased and is at 93.94 as of 1/25/2022.
The Lean Hog Index increased and is at 78.45 as of 1/24/2022.
Estimated Slaughter for Wednesday is 475,000, which is above last week’s 457,000 and below last year’s 493,000. Tuesday’s slaughter was revised lower to 471,000. The weekly estimated total is 1,394,000, which is above last week’s 1,320,000 and below last year’s 1,431,000.
March Feeder Cattle opened higher, made the session low at 160.375 and rallied to the high at 162.30 in the first hour and 15 minutes of trading. It grinded lower the rest of the session and settled at 160.80. The range kept price basically within the 160.625 to 162.00 support/ resistance zone. Corn prices rebounded and its ability to stay above the 6 handle is not good for the feeder market in my opinion. A failure from the low could see price re-test support at the rising 200 DMA now at 158.85. Support then comes in at 157.30. If settlement holds, we could see a re-test of resistance at the declining 100 DMA now at 161.375 and then 162.00. There is a gap from the Wednesday high at 162.30 to the Friday low 163.15.
The Feeder Cattle Index decreased and is at 159.50 as of 1/25/2022.
April Live Cattle gap opened higher, closed the gap while making its low at 140.75 then surged to the high of the day at 142.225. Cattle consolidated the rest of the session and settled near the high at 141.90. Traders seemed excited at the possibility of slaughter levels coming back to normal levels as slaughter was at its highest level in a few weeks at 118,000 on Tuesday, in my opinion. The guess is when slaughter returns to normal, we could see packers get aggressive in order to procure cattle. We’ll see… still have a lot of ground to make up from the previous weeks’ decline in slaughter. The Wednesday rally closed the gap from the Monday high at 141.35 to the Friday low at 142.025. This and resistance at 142.25 caused traders to pause in my opinion hence the consolidation for the remainder of the day. A breakout above 1422.25 could see price move towards the 143.775 high and resistance at 144.025. A failure from settlement could see price revisit support at 140.175.
Boxed beef cutouts fell as choice cutouts dropped 2.92 to 289.46 and select plunged 3.60 to 279.72. The choice/ select spread widened to 9.74 and the load count was 132.
Wednesday’s estimated slaughter is 118,000, which is above last weeks 115,000 and below last year’s 120,000. The estimated total for the week is 351,000, which is above last week’s 345,000 and is below last year’s 353,000.
The USDA report LM_Ct131 states: So far for Wednesday in the Texas Panhandle negotiated cash trading has been slow on light demand. Compared to last week live purchases traded steady at 137.00. In Kansas negotiated cash trading has been slow with moderate demand. Compared to last week live purchases ranged from 136.00-137.00, mostly 1.00 lower at 136.00. Thus far for Wednesday in Nebraska and Western Cornbelt negotiated cash trading has been limited on light demand. In Nebraska not enough purchases for a market trend, Tuesday was the last reported live and dressed purchase market at 137.00 and 218.00, respectively. In the Western Cornbelt thus far for the week live purchases have traded steady to 2.00 lower at 137.00 and dressed purchases have traded steady at 218.00.
The USDA is indicating cash trades for live cattle from 135.00 – 138.00 and from 217.00 – 218.50 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
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