Walsh Trading Daily Insights
Commentary
June Lean Hogs opened higher and traded down to the session low at 97.475. The market turned and traded higher, making an early high at 100.575. This was just above resistance at 100.075 and below the Thursday high at 100.85. The inability to take out that high led to a pullback and then consolidation. Price made another run to try and take out the Thursday high, grinding higher and making a new high for the session at 100.825, which wasn’t enough to take out the high. It settled nearby at 100.75. So even with this great reversal action and price surge, it still led to an inside candlestick, as the low was above the Thursday low at 97.10 (which is a new low for the down move). This could be considered profit taking after a week of declines as we go into the weekend, in my opinion. The cash market is struggling as both cutouts and cash prices have flattened. High hog weights are keeping production at high levels (in my opinion), as packers are using hogs under their control to limit their need to go after and be aggressive in bidding for hogs to slaughter. Inflation pressures throughout the economy are leading traders to worry that consumers are retrenching and a potentially weakening economy could inhibit demand for high priced pork. Settlement was above resistance at 100.075, which is a positive in my opinion. If price fails from 100.075, we could see a re-test of support at 98.475. Support then comes in at 97.30. If settlement holds, we could test resistance at 101.975 and then the rising 100-DMA now at 102.975. There is a gap from the May 6th low at 103.70 to the May 9th high at 103.35. Resistance then comes in at 104.35.
The Pork Cutout Index decreased and is at 101.41 as of 5/12/2022.
The Lean Hog Index was lower and is at 101.04 as of 5/11/2022.
Estimated Slaughter for Friday is 438,000, which is below last week’s 444,000 and last year’s 462,000. Saturday slaughter is expected to be 48,000, which is even with last week and above last year’s 11,000. Thursday’s slaughter was revised lower to 472,000. The estimated total for the week (so far) is 2,375,000, which is below last week’s 2,414,000 and last year’s 2,384,000.
August Feeder Cattle also formed an inside candlestick, opening higher and then breaking down to the session low at 166.30 and then racing to the high at 168.90. It meandered the rest of the session and settled at 168.025. This is also a profit taking venture (in my opinion), after crashing all week, making a new low on Thursday at 166.15. Price was able to settle in the upper end of the range, which is a positive way to end the week. If price can push above the Friday high, we could see a test of resistance at 169.95. Resistance then comes in at 172.00. A failure from settlement, could see price re-test support at 167.15. Support then comes in at 165.775.
The Feeder Cattle Index was lower and is at 156.36 as of 5/12/2022.
June Live Cattle opened higher, then raced to the low of the day at 131.275. It recovered and traded higher to the session high at 132.725 and then drifted lower the rest of the session to settle at 132.075. Price stalled below resistance at 132.95 and it traded below the Thursday low but Monday’s low at 131.025 remains the low for the week. A breakdown below settlement could see price Test the Monday low and then make its way to support at 130.45. A recovery past resistance at 132.95 could see price move higher to test resistance at 134.35. With the cash market hanging around steady, it is disappointing that the futures market can’t hold onto rallies. But there is pessimism in the markets as concerns that the tightening packer margins with cutouts unable to seasonally move higher and with plenty of cattle coming, there are doubts that cash prices can hold current levels going forward. There are worries demand is weak for beef as weakening Equity prices and inflation concerns are reducing the consumer pocketbook and forcing them to change their eating habits to cheaper foods. …And what is cheap in this environment…..
Boxed beef cutouts were mixed as choice cutouts increased 1.75 to 258.95 and select dipped 0.46 to 243.90. The choice/ select spread widened and is at 15.05 and the load count was 92.
Friday’s estimated slaughter is 120,000, which is below last week’s 121,000 and above last year’s 116,000. Saturday slaughter is expected to be 42,000, which is below last week’s 49,000 and last year’s 63,000. The estimated total for the week (so far) is 657,000, which is even with last week and above last year’s 644,000.
The USDA report LM_Ct131 states: So far for Friday in the Western Cornbelt negotiated cash trading has been limited on light demand. In the Southern and Northern Plains negotiated cash trading has been mostly inactive with very light demand. Not enough purchases for a market trend in any region. Wednesday was the last reported market in the Texas Panhandle, Nebraska and Western Cornbelt. In the Texas Panhandle with live purchases at 140.00. In Nebraska live and dressed purchases traded at 144.00 and 230.00, respectively. In the Western Cornbelt live and dressed purchases traded from 144.00-145.00 and 227.00-230.00, respectively. Tuesday was the last reported market in Kansas with live purchases at 140.00. Last week in Colorado live purchases traded from 142.00-148.00.
The USDA is indicating cash trades for live cattle from 138.00 – 148.00 and from 222.00 – 230.00 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 19, 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.