Walsh Trading Daily Insights
Commentary
June Lean Hogs opened lower, made the high at 119.10 and broke down to the low at 116.55 by mid-morning. It consolidated the rest of the session and settled at 117.175. The break down took price below support at 117.20 and sets up the beak out candle low from April 12th as a key psychological point for the June Hogs, in my opinion. Support is just above this low at 115.925. This confluence must hold in my opinion or we could see a push to test the April 5th low at 112.20. The April 19th high at 123.075 and ensuing break down sets up an emerging down trend if the April 5th low is taken out in the June contract. Futures are still rich to cash as futures are normally around 9 handles over the Lean Hog Index. Settlement puts futures 16.245 over the current LHI. Futures are still saying it expects the LHI to surge higher but, the index needs to surge to justify the high June futures price. Fundamentally, in my opinion, cash should continue higher as the lower supply and high feed costs imply a need for higher cash. But, with weights extremely heavy, the lower slaughter numbers could be the packer’s way of controlling cash prices (cutouts & cash hogs) and being able to keep production at reasonable levels. Our lower export sales are playing into this as US hog prices are high relative to the rest of the world, in my opinion. A failure below the low, could see price work its way lower and test support at 115.925 and the April 12th low. Support then comes in at 114.675. If price can get above 117.20, we could test the flattening 8-DMA, now at 118.575. Resistance then comes in at the flat 21-DMA at 119.60, Then 119.90.
The Pork Cutout Index ticked lower and is at 108.79 as of 4/19/2022.
The Lean Hog Index increased and is at 100.93 as of 4/18/2022.
Estimated Slaughter for Thursday is 482,000, which is above last week’s 478,000 and below last year’s 483,000. The estimated total for the week (so far) is 1,797,000 which is below last week’s 1,898,000 and last year’s 1,935,000.
May Feeder Cattle opened higher, made the low at 162.825 and rallied the rest of the day to the high at 164.925. It settled just under the high at 164.85. This is a nice follow-through rally from Wednesday’s surge, taking price above the 100-DMA at 164.225. There is bullish sentiment in the futures as corn prices fell and the fat cattle market remains strong. However, the Feeder Cattle Index continues to weaken, making a new low for the week (153.90) and it is at its lowest price since March 15th when it was at 153.14. So, sentiment is overtaking the reality of where cash is. Now, as with the Hog futures, watch out for a snap back in Feeders as futures are rich to the index. Even the April futures contract is rich to cash with its settlement at 158.45. It expires April 28th and is implying the index will reverse course and rally to levels last seen in early March. If price can hold settlement, we could see a test of resistance at 165.775. Resistance then comes in at 167.175. A failure below the 100-DMA could see price test support at the 50 & 21-DMAs, now at 163.625 and 163.175 respectively. Support then comes in at the 200-DMA, now at 162.35.
The Feeder Cattle Index increased and is at 153.90 as of 4/20/2022.
June Live Cattle continued is rally on Thursday, reaching 139.95 for the Thursday high, matching the high from March 8th when the April contract was the lead contract on the continuous chart. Settlement was just under the high at 139.90. Settlement was above the 100-DMA at 139.55 and is below resistance at 140.175. Matching the March 8th high could lead to a potential double top if cattle can’t over-take it on Friday. Again, the fat cash market is showing signs of strength as prices reached a high at 147.00 for the second day in a row, creating excitement in the futures market. If price falls below the 100-DMA, we could see price test support at 138.60. If price can hold settlement, we could see price test resistance at 140.175. Resistance then comes in at 142.225.
Boxed beef cutouts were mixed as choice cutouts rose 1.35 to 270.17 and select dipped 0.85 to 255.68. The choice/ select spread widened and is at 14.49 and the load count was 104.
Thursday’s estimated slaughter is 122,000, which is below last week’s 123,000 and above last year’s 119,000. The estimated total for the week (so far) is 483,000, which is below last week’s 498,000 and above last year’s 479,000.
The USDA report LM_Ct131 states: Thus far for Thursday negotiated cash trading has been limited on light demand in Kansas, Nebraska, and the Western Cornbelt. Not enough purchases for a market trend. Negotiated cash trading has been at a standstill in the Texas Panhandle and Colorado. On Tuesday in the Southern Plains live purchases traded at 140.00. In Nebraska on Tuesday, live and dressed purchases traded from 144.00-146.00 and at 230.00, respectively. On Tuesday in the Western Cornbelt live and dressed purchases traded from 145.00-146.00 and at 230.00, respectively. The last reported market in Colorado was last week with live purchases from 140.00-142.00.
The USDA is indicating cash trades for live cattle from 135.00 – 147.00 and from 223.00 – 238.00 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 21, 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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