Walsh Trading Daily Insights
Commentary
April Lean Hogs surged on Tuesday, ignoring continued fighting in the Ukraine and the soaring grain markets. Tuesday saw hog fundamentals reassert control and the price action created a morning star candlestick pattern in the April Hogs. Slaughter levels remain low and I believe it’s because hog numbers are down more than expected and pork demand is strong. I think packers will remain aggressive in purchasing if they can find them. The day’s range is from a low of 103.025 to the high at 106.75 with settlement near the high at 106.20. The low was below the rising 21-DMA now at 103.65 and the high was below resistance at 106.85. A breakout above 106.85 could take price up to the next resistance level at 107.925. If price can’t hold settlement, we could see a re-test of support at 104.35.
The Pork Cutout Index increased and is at 111.44 as of 2/28/2022.
The Lean Hog Index increased and is at 99.09 as of 2/25/2022.
Estimated Slaughter for Tuesday is 482,000, which is above last week’s 472,000 and below last year’s 494,000. Monday’s slaughter was revised lower to 451,000. The estimated total for the week is 933,000, which is below last week’s 950,000 and last year’s 987,000.
April Feeder Cattle opened lower and raced to the session high at 161.95. The high is just below resistance at 162.00 and it couldn’t sustain the rally as corn traded up limit for the day. The weight of corn was too much to bear and price collapsed and traded lower, breaking through support at the rising 200-DMA now at 160.775 and the key level at 160.625. It made the low at 159.15 and settled below support at 159.80. If corn continues higher, we could see more downside in the Feeder market as producers do not like corn sustaining above the $7.00 handle, in my opinion. There is a battle to be waged as cattle numbers are in decline and corn prices are surging. If the Russia – Ukraine conflict settles down with minimal destruction to Ukraine’s agricultural areas, corn could have a big retracement. Continued fighting or destruction of is farming could see corn and wheat supplies tighten further and gulp…. even more upward pressure, in my opinion. If settlement holds, we could see price test resistance at the 200-DMA and then 162.00. A failure below settlement could see price test support at 157.30.
The Feeder Cattle Index declined and is at 159.67 as of 2/28/2022.
April Live Cattle traded within Monday’s trading range as traders are waiting for the cash market to trade, in my opinion. Cash has been quiet and Wednesday is usually the day when we see some movement of cattle so let’s hope packers need for cattle outweighs any fear of outside market turbulence. The Tuesday range was from a high at 142.35 and a low at 140.45. Settlement was at 140.525. The high was just above resistance at 142.25 and the low above support at 140.175. A breakdown below 140.175 could see price test support at 138.60. If price can hold settlement, we could see a re-test of resistance at 142.25.
Boxed beef cutouts decreased as choice cutouts declined 0.83 to 256.68 and select declined 1.89 to 251.52. The choice/ select spread widened and is at 5.16 and the load count was 144.
Tuesday’s estimated slaughter is 124,000, which is above last weeks and last year’s 123,000. The estimated total for the week is 246,000, which is above last week’s 231,000 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 Southern Plains. In Nebraska and Western Cornbelt negotiated cash trading has been mostly inactive on very light demand. Not enough purchases for a market trend. Last week in the Southern Plains live purchases traded at 142.00. In Nebraska live purchases traded from 142.00-144.00 and dressed purchases traded at 227.00. In the Western Cornbelt live and dressed purchases traded at 144.00 and 227.00, respectively.
The USDA is indicating cash trades for live cattle from 140.50 – 142.00 and from 224.00 – 229.00 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, March 3, 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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