Walsh Trading Daily Insights
Commentary
June Lean Hogs gap opened higher, traded to the session high at 114.00 and then rejected the rally. It closed the gap and tried to rally after making an early low but couldn’t take out the high and traded lower the rest of the session to the low at 111.825. It settled at 112.175. Futures have surged since Tuesday’s month end debacle, but couldn’t hold on to its strength after making a new high for recent up move. Today’s candle could be a reversal candle after the strong open and failure the rest of the session. Today’s low and settlement was above support at 111.675 and this must hold or we could pull back further to test the rising 8-DMA now at 110.45. Support then comes in at 109.85. If settlement holds, we could test the 112.975 resistance level once again and then the Thursday high at 114.00. Cutouts and cash have been on an upswing, but futures are strong compared to the Lean Hog Index, causing traders to get nervous at new up swings. We have exports before the open on Friday, and with cutouts up on Thursday, a strong report could see price surge again as demand would be strong at high price levels. Packers have been aggressive this week in paying up for hogs and with world hog populations shrinking, demand for US pork could remain strong for quite a while, in my opinion.
The Pork Cutout Index increased and is at 107.81 as of 6/01/2022.
The Lean Hog Index decreased and is at 104.91 as of 5/31/2022.
Estimated Slaughter for Thursday is 475,000, which is even with last week and above last year’s 472,000. The estimated total (so far) is 1,421,000, which is below last week’s 1,884,000 and above last year’s 1,318,000.
August Feeder Cattle opened in a shaky manner as corn was waffling up and down around the session high, making the session low at 169.275. This tested the key level at 169.95 and as corn decided to break down to its session low, Feeders took off higher and never looked back, even with occasional corn rebounds. It rallied the rest of the session and made the high at 173.60 and then pulled back a bit to settle at 172.95. It was another strong rally after Tuesday’s breakdown below the 100-DMA at 165.525. The rally took price past resistance at 173.325, but it couldn’t settle above it. Resistance remains at 173.325 and a break out above here could take price up to resistance at 175.70. A break down below settlement could see support tested at 172.00. Support then comes in at 169.95. Futures are above the Feeder Cattle Index and even with today’s slight increase, it is very extended compared to the index. A recovery in corn could lead to a steep snapback in the futures towards the index.
The Feeder Cattle Index increased and is at 153.38 as of 6/01/2022.
August Live Cattle gap opened higher and immediately rejected the open price, trading down past support at 132.95 to the session low at 132.60. Price climbed above support and grinded higher the rest of the session to the high at 134.50. to the session high at 134.50. The high was just below resistance at 134.55 and it dipped off the high to settle at 134.125. The rally took price back to the upper end of the trading range it is in since June was the lead contract. The high is at 134.875 and the low is at 129.975. There is strong resistance here as the declining 50-DMA at 134.65 is just above the 134.55 resistance level and the rising 200-DMA is at 135.325. Strong headwinds for cattle futures, in my opinion. Cash made a new high for the week on Thursday, reaching 143.00 on a live basis, after trading mostly lower to steady all week. Maybe this is what goosed futures. Resistance remains at the levels mentioned earlier and a pop above the 200-DMA could see price test resistance at 136.35. A failure from settlement could see price revisit support at 132.95.
Boxed beef cutouts were mixed as choice cutouts decreased 0.77 to 266.65 and select increased 0.72 to 249.63. The choice/ select spread narrowed and is at 17.09 and the load count was 131.
Thursday’s estimated slaughter is 127,000, which is above last week’s 124,000 and last year’s 119,000. The estimated total for the week (so far) is 381,000, which is below last year’s 499,000 and above last year’s 325,000.
The USDA report LM_Ct131 states: Thus far for Thursday negotiated cash trading has been limited on light demand in all major feeding regions. Not enough purchases for a market trend. Wednesday was the last reported market in any region. In the Southern Plains live purchases traded at 135.00. In Nebraska live and dressed purchases traded at 139.00 and 222.00, respectively. In the Western Cornbelt live and dressed purchases traded at 140.00 and 222.00, respectively.
The USDA is indicating cash trades for live cattle from 134.00 to 143.00 and from 214.00 to 222.50 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 Friday, June 03, 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
888.391.7894
Fax: 312.256.0109
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