Walsh Trading Daily Insights
Commentary
June Lean Hogs closed the week in a disappointing manner, opening lower and breaking down through support at 104.35 to the session low at 103.70. The high was at 106.725 and settlement was below support at 104.10. Worries that the cash market can’t get untracked and resume its way higher putting pressure on futures after a 2-day bounce back in the price action. The Lean Hog Index has been heading lower and the pork cutout index has also stalled. Even the load counts are weak…. Retailers have been able to keep a lid on price in a normally strong seasonal time period as they prepare for upcoming holidays and the grilling season. The Friday high was below resistance at 106.85 and this remains key resistance in my opinion. A reversal on Monday could see price revisit resistance. A continuation lower could see price re-test support 101.975 and the rising 100-DMA now at the same level. A failure from here would put support at 100.075 in play.
The Pork Cutout Index increased and is at 105.40 as of 5/05/2022.
The Lean Hog Index dipped and is at 100.96 as of 5/04/2022.
Estimated Slaughter for Friday is 457,000, which is above last week’s 446,000 and below last year’s 461,000. Saturday slaughter is expected to be 48,000, which is above last week’s 40,000 and last year’s 10,000. The estimated total for the week (so far) is 2,427,000, which is above last week’s 2,389,000 and last year’s 2,396,000.
August Feeder Cattle opened higher, traded to the low at 174.225 and then rallied to the session high at 176.025 as corn weakened. Even with the weak corn (stayed weak), Feeders stalled. It broke down to test the low consolidating near the low the rest of the session and settling near the low at 174.70. The rally pushed past resistance at 175.70 and couldn’t sustain itself, leading to the consolidation. If price can hold settlement, we could see a re-test of resistance at 175.70. Resistance then comes in at the May 4th high at 177.50.
The Feeder Cattle Index ticked up and is at 155.60 as of 5/05/2022.
June Live Cattle opened higher and made the high of the day at 134.05. It grinded lower the rest of the session to the low at 132.625 Settlement was just above the low at 132.75. It is now at the low end of the large consolidation band from a high of 140.00 to the low at 132.375. A steady cash market was not good enough to stave off the selling pressure as cutout prices work their way lower and a weak stock market has put recession up on the traders’ minds. With beef prices high at grocery stores and restaurants, inflation causing worries about demand destruction it is actually encouraging to see cutouts head lower from its extreme levels. I think it would lower meat prices in the retail sector and create more demand from consumers. I don’t feel bad for packers as these levels would still be considered record levels just a couple of years ago. If retailers continue to gain leverage and slaughter levels remain high and slaughter this week is estimated higher by a little than analyst’s expectations. Packers so far have not been able to crush the cash market and if they have meet retail purchase orders, maybe the cash market can hang in there. But, if futures prices continue to work their way lower, packers could try to play hardball and try to press producers into selling at lower prices… We’ll see…. Settlement was below support at 132.95 and a breakdown from here could see price test support at 130.45. Support then comes in at 128.10. If price hold settlement, we could see price test resistance at 134.35. Resistance then comes in at the rising 200-DMA now at 134.925 and then 136.35. There is a gap from the April 22nd low at 138.35 and the April 25th high at 136.85.
Boxed beef cutouts decreased as choice cutouts declined 0.74 to 254.44 and select decreased 0.75 to 245.06. The choice/ select spread widened and is at 9.38 and the load count was 80.
Friday’s estimated slaughter is 121,000, which is above last week’s 118,000 and last year’s 111,000. Saturday slaughter is expected to be 49,000, which is above last week’s 33,000 and below last year’s 57,000. The estimated total for the week (so far) is 657,000, which is above last week’s 649,000 and above last year’s 639,000.
The USDA report LM_Ct131 states: **Correction to Negotiated Cash Steers Dressed Delivered** **Correction to Negotiated Grid Mixed Steer/Heifers Dressed Delivered** So far for Friday in Nebraska negotiated cash trading has been limited on light demand. In the Southern Plains, Colorado and Western Cornbelt negotiated cash trading has been mostly inactive on light demand. Not enough purchase in any region for a market trend. In Kansas on Thursday live purchases traded at 138.00. In all other regions the last reported market was on Wednesday. In the Texas Panhandle live purchases traded at 140.00. In Nebraska live and dressed purchases traded at 146.00 and 232.00, respectively. In the Western Cornbelt live purchases traded at 146.00 and dressed purchases traded from 230.00-232.00. In Colorado live purchases traded from 142.00- 146.00.
The USDA is indicating cash trades for live cattle from 138.00 – 150.00 and from 223.00 – 234.00 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, May 12, 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
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