Walsh Trading Daily Insights
Commentary
June Lean Hogs opened higher and broke down to the low of the session at 113.15. It was a test of the Wednesday low (113.10) and it held, setting up a rally to the high at 115.90. It couldn’t sustain the rally and pulled back, settling at 114.15. Price remained within the Tuesday trading range as strong exports couldn’t drive price higher. The rally stopped just short of resistance at 115.925 and just above the rising 21-DMA now at 115.80. Settlement was below the key level at 114.675. A disappointing reaction to a strong Export Sales Report indicating demand hasn’t been wavering. The cash market has stalled however, and traders seem to be focusing on the inability to sustain the rally in the cash indices. The cutout and Lean hog indicies have pulled back from their highs so traders want to see cash prices move higher. Weights are high and traders are assuming hogs are backing up, in my opinion. If price can get above and hold the 21-DMA, we could see price test resistance at 117.20. A failure from settlement, could see price continue to work its way lower and re-test support at 112.975. Support then comes in at 111.675.
The Pork Cutout Index up-ticked and is at 105.39 as of 4/06/2022.
The Lean Hog Index decreased and is at 101.08 as of 4/05/2022.
Estimated Slaughter for Thursday is 479,000, which is even with last week and below last year’s 490,000. Wednesday’s slaughter was revised lower to 451,000. The estimated total for the week (so far) is 1,887,000 which is below last year’s 1,914,000 and above last year’s 1,799,000.
May Feeder Cattle gap opened higher, traded past resistance at 160.625 to the session high at 161.10 and then meandered until the sessions’ end when it broke down to the low at 159.175. It settled near the low at 159.475. Corn had started the day with some weakness but it quietly moved higher throughout the session, limiting May’s ability to rally. The deferred contracts however, were strong and settled over a buck higher on the day. The cash index has been in decline as corn rallies and this could continue in the near future. Some producers are telling me that feedlots have a lot of cattle still to move and have been backing off of buying cattle. Price has now spent a second day within the Tuesday trading range. A rally past 160.625 could see price test resistance at the flattening 200-DMA, now at 162.175. A failure from settlement could see price re-test support at 157.30. Support then comes in at 156.075.
The Feeder Cattle Index up-ticked and is at 155.59 as of 4/06/2022.
June Live Cattle opened higher, made the session high at 134.975 and drifted until the day’s end, making the low at the end of the session at 134.025. It settled near the low at 1344.10. It also was stuck within the Tuesday candle. Price repeatedly tried to bust through resistance at 134.55 and would climb above it and fail, finally dipping lower and settling below it. Cash has been holding well with this breakdown in futures, remaining steady with last week’s prices, in fact it traded as high as 142.00. If price fails at settlement, we could see price re-test support at 132.95. Support then comes in at 130.45. If price can overtake resistance at 134.55, we could see price test resistance at the declining 21-DMA now at 135.95. Resistance then comes in at 136.35.
Boxed beef cutouts were mixed as choice cutouts down-ticked 0.04 to 271.00 and select increased 0.17 to 261.22. The choice/ select spread narrowed and is at 9.78 and the load count was 94.
Thursday’s estimated slaughter is 124,000, which is above last week’s 121,000 and last year’s 120,000. The estimated total for the week (so far) is 495,000, which is above last week’s 490,000 and last year’s 466,000.
The USDA report LM_Ct131 states: So far for Thursday negotiated cash trading has been mostly inactive on light demand in all regions. Not enough purchases in any region for a full market trend. Tuesday was the last reported market in all regions. In the Southern Plains live purchases traded from 137.00-138.00. In Nebraska live and dressed purchases traded from 138.00-140.00 and at 222.00, respectively. In the Western Cornbelt live and dressed purchases traded at 140.00 and at 222.00, respectively. In Colorado live purchases traded at 138.00.
The USDA is indicating cash trades for live cattle from 136.00 – 142.00 and from 219.00 – 226.00 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, April 8, 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.
**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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