Walsh Trading Daily Insights
Commentary
June Lean Hogs opened lower and made the session low at 105.625. It reversed course and rallied to the session high at 108.85. It pulled back to just below support at 106.85 and then recovered into the close to settle near the high at 108.275. Cash markets strength saw some speculative buying in the futures as futures and the index are in close proximity to each other. However, cutouts took a hit today so some negativity may creep back into futures if we get weak export sales numbers on Thursday. The rally took price past resistance at 107.925 and long-term moving average resistance at the 100 and 21-DMAs (108.50 and 108.625 respectively). Settlement was between these levels so a strong open on Thursday could jettison price higher to test resistance at 109.85. A weak open could see futures revisit support at 106.85.
The Pork Cutout Index rose and is at 108.61 as of 6/14/2022.
The Lean Hog Index dipped and is at 108.13 as of 6/13/2022.
Estimated Slaughter for Wednesday is 472,000, which is below last weeks and last year’s 477,000. Tuesday’s slaughter was revised lower to 469,000. The estimated total for the week (so far) is 1,401,000, which is below last week’s 1,431,000 and last year’s 1,437,000.
August Feeder Cattle opened higher and made the session low at 172.30. It grinded higher from here and reached the session high at 173.85, it pulled back and then settled at 173.275. The rally took price past resistance at 173.325 and dipped into the gap from the Monday high at 173.75 to the Friday low at 174.025. It didn’t do much after the breach and settlement was below resistance. I believe the rally came from strengthening fat cattle cash markets, incentivizing bulls with dreams of stronger prices down the road in the feeder markets, because the Feeder Index has come down since peaking on Friday at 161.87. A break down from settlement could see support re- tested at 172.00. Support then comes in at 169.95. If price rally past the Wednesday high we could see price close the gap. Resistance then comes in at 175.70.
The Feeder Cattle Index dipped and is at 160.08 as of 6/14/2022.
August Live Cattle gap opened higher and surged to the session high at 137.50. It consolidated the rest of the session and settled at 136.80. The rally stopped just shy of the declining 100-DMA at 137.60. The rally closed the gap from the June 13th high at 135.475 and the June 10th low at 136.025 and settled above the key level at 136.35. The cash market has showed some impressive strength this week, especially since outside markets were punished and cattle futures collapsed on Monday, creating expectations for weaker cash this week. Nebraska and the Western corn-belt has traded as high as 149.00 on a live basis and 236.00 on a dressed basis. Not what the market expected in light of earlier futures trading. The weakness in the markets were attributed to expectations the Fed would increase rates today by 75-basis points instead of 50-basis points. The Fed made its interest rate announcement at closing time for livestock and it was indeed 75-basis points. This could dampen consumer sentiment and potentially limit beef demand down the road. But there are high temperatures throughout cattle country that has caused some deaths of cattle and could get worse as the heat is expected to last for a while. This could create more problems for the industry as loss of cattle could rise. This could get weights down also and force packers to grab whatever cattle they can to maintain production and fill orders to retailers. A failure from settlement could see price re-test support at 136.35. Support then comes in at the 200-DMA now at 135.575. If price can overtake the 100-DMA and resistance at 137.875, we could see a test of resistance at 138.60. Resistance then comes in at 140.175. Southern cash needs to strengthen in my opinion, in order to push futures prices over the top as prices stagnate in the lower end of the cash trade.
Boxed beef cutouts decreased as choice cutouts decreased 1.22 to 268.22 and select decreased 1.14 to 245.68. The choice/ select spread narrowed and is at 22.54 and the load count was 134.
Wednesday’s estimated slaughter is 126,000, which is even with last week and above last year’s 121,000. The estimated total for the week is 368,000, which is below last week’s 377,000 and above last year’s 360,000.
The USDA report LM_Ct131 states: So far for Wednesday in Nebraska and Western Cornbelt negotiated cash trading has been slow with light to moderate demand. In Nebraska a few live and dressed purchases traded steady with the last reported market on Tuesday at 145.00 and 230.00, respectively. In the Western Cornbelt a few live purchases traded at 145.00. However, not enough purchases for a market trend. Tuesday was the last reported market with live and dressed purchases from 144.00-145.00 and at 230.00, respectively. Thus far for Wednesday in the Southern Plains and Colorado negotiated cash trading has been mostly inactive on very light demand. Not enough purchases for a market trend. Tuesday was the last reported market in the Texas Panhandle and Colorado with live purchases from 136.00- 138.00 and 145.00, respectively. Last week in Kansas live purchases traded at 138.00.
The USDA is indicating cash trades for live cattle from 136.00 – 149.00 and from 223.00 – 236.00 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, June 16, 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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