Livestock Report

Ben DiCostanzo General Commentary

Walsh Trading Daily Insights

Commentary

April Lean Hogs made the low in the opening minutes of trading, then surged the rest of the session, making a new high for the up move at 112.675. The low was at 108.925 and settlement was near the high at 112.075. Cash market continues to be strong with cutouts and cash on an upward trajectory that has powered the indices higher. Futures are still rich to cash but traders seem to be of the mindset that cash will eventually catch up to futures. The rally stopped just shy of resistance at 112.975 and settlement is above the key level at 111.675. Support then comes in at 109.85.

The Pork Cutout Index increased and is at 110.15 as of 2/21/2022.

The Lean Hog Index jumped and is at 97.12 as of 2/18/2022.

Estimated Slaughter for Tuesday is 479,000, which is above last week’s 478,000 and below last year’s 499,000. The weekly estimated total is 957,000, which is above last week’s 948,000 and below last year’s 988,000.

March Feeder Cattle opened lower, made the session high at 165.725 and then traded lower making the session low at 163.25 and recovered some of its losses to settle at 164.225. Corn was strong on Tuesday and the weight of that strength was too much for the Feeder market. The high was just below resistance at 165.775 and the low was just under support at 163.50. If settlement holds, we could see a re-test of resistance at 165.775. Resistance then comes in at 167.15. A failure below 163.50 could see price test support at 162.00.

The Feeder Cattle Index ticked higher and is at 162.13 as of 2/21/2022.

April Live Cattle continues to trade around the key level at 146.825. It opened lower, made the low at 145.40 and then rallied to the session high at 146.925. Success didn’t last and the market pulled back and settled at 146.025. The breakdown tested support at the rising 21-DMA now at 146.025 and the rally failed at the 146.825 key level. Futures traders are nervous about the declining cutouts and the belief packers will defend their margins going forward, in my opinion. Cash hasn’t been able to breakout higher and until it is able to rally futures will remain in a trading range. Traders want hope for strengthening cash, like in the Hog market. I think with cutout prices in decline, packers will have more orders and with more orders to fulfill they will need to buy cattle and this could lead to an increase in cash prices if producers can back off and make packers bid up. A rally past the high could see price move towards resistance at 149.375. A breakdown below 146.825 could see price re-test the rising 21 DMA. The next support level is at 144.025.

Boxed beef cutouts were mixed as choice cutouts declined 2.45 to 261.64 and select increased 1.80 to 263.64. The choice/ select spread inverted and is at -2.00 and the load count was 117.

Tuesday’s estimated slaughter is 123,000, which is even with last week and last year. The estimated total for the week is 231,000, which is below last week’s 244,000 and last year’s 241,000.

The USDA report LM_Ct131 states: Thus far for Tuesday negotiated cash trading has been at a standstill in the Texas Panhandle and Nebraska. In Kansas and the Western Cornbelt negotiated cash trading has been mostly inactive with very light demand. Not enough purchases for a market trend. Last week in the Southern Plains and Nebraska live purchases traded at 142.00 and dressed purchases, in Nebraska, traded at 226.00. For the prior week in the Western Cornbelt live and dressed purchases traded from 142.00- 144.00 and at 226.00, respectively.

The USDA is indicating cash trades for live cattle from 142.00 – 145.00 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 Friday, February 25, 2022 at 2:00 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.

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Ben DiCostanzo

Senior Market Strategist

Walsh Trading, Inc.

Direct: 312.957.4163

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