Walsh Trading Daily Insights
Commentary
June Lean Hogs gap opened lower and crashed. Tuesday’s trade was volatile to say the least as price nearly went limit down in a move that tested support at 122.275. The low was just under support at 121.90 and buying came in at support. It took price past the key level at 125.50 to the session high at 125.725, closing the opening gap in the process. Price wasn’t able to hold the high and pulled back to settle at 124.625, just above the key level at 124.00. I think Monday’s new high and spinning top candle with futures at an extreme premium to the cash index stretched the band enough to need a snap back as price at least for the time being reached too far and it couldn’t be sustained. I think the recovery rally indicates the bullishness traders have for hogs, buying the break down in price. I think traders looked at the estimates for the Hogs and Pigs Report (out after Wednesday’s close) and lightened their load as there are some indications of a stabilized supply of hogs going forward. If price can hold above settlement, we could re- test resistance at 125.50. A failure from 124.00, could see price test the Tuesday low.
The Pork Cutout Index increased and is at 107.66 as of 3/28/2022.
The Lean Hog Index increased and is at 102.93 as of 3/25/2022.
Estimated Slaughter for Tuesday is 479,000, which is even with last week and below last year’s 488,000. The estimated total for the week is 955,000 which is above last year’s 947,000 and below last year’s 971,000.
May Feeder Cattle took off to the stars, gap opening higher, making the session low at 166.675 and then surging to the high at 170.40 early in the trading session. Feeders spent the rest of the session consolidating and it settled at 169.40. Corn was slammed overnight and this caused euphoria to reign in Feederland. With rumors of some sort of peace agreement possible between the Russians and Ukrainians, the Ag market tanked as traders saw sugarplums in their dreams of the Ukrainians able to get their planting done and exports to market. I think there is a way to go before we know what kind of damage was done to farmland (if any) and if they will get anything going. The rally took price past resistance at 169.95 and the pullback saw it settle below it. If settlement fails, we could see price pullback and test support at 167.15. The gap is next from the Tuesday low at 166.675 to the Monday high at 166.15. A rally past the Tuesday high could see price test resistance at 172.00.
The Feeder Cattle Index increased and is at 155.29 as of 3/28/2022.
June Live Cattle gap opened higher, closed the gap as it made its session low at 136.675 then rallied the rest of the session to the high at 138.525. It settled near the high at 138.475. This took cattle out of its 137.75 – 134.075 trading range to resistance at 138.60. With the high and settlement below it, this is the level to beat. If price can overrun resistance, we could see price move towards the 140.175 resistance level. If price fails to hold settlement, we could see price revisit the consolidation band. Corn weakness, possible peace talk and Feeder strength all contributed to the positive price action in cattle.
Boxed beef cutouts were mixed as choice cutouts rose 0.63 to 264.50 and select declined 1.48 to 254.84. The choice/ select spread widened and is at 9.66 and the load count was 87.
Tuesday’s estimated slaughter is 125,000, which is above last week’s 123,000 and last year’s 119,000. Monday’s slaughter was revised lower to 119,000. The estimated total for the week is 244,000, which is above last week’s 242,000 and last year’s 236,000.
The USDA report LM_Ct131 states: Thus far for Tuesday negotiated cash trading has been at a standstill in the Southern Plains and Nebraska. In 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 138.00, and dressed purchases, in Nebraska, traded at 221.00. For the prior week in the Western Cornbelt live and dressed purchases ranged from 138.00-142.00 and 221.00-225.00, respectively.
The USDA is indicating no cash trades for live cattle and 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 31, 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
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
tested support at the
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall not be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.