Walsh Trading Daily Insights
Commentary
August Lean Hogs opened lower, traded to the session low at 110.70 and worked its way to the session high at 113.225, settling nearby at 112.825. The opening breakdown tested the gap created with the Friday high at 110.50 and the Monday low at 111.325 as bulls regained control of the price action before closing the gap. The fundamentals are strong in my opinion, as the cutout market and the cash trade have been surging. This is in the face of many analysts insisting cutouts and cash will crash after the 4th of July. Slaughter levels have not increased as expected by many while weights have declined. Futures have not surged to new heights with all this occurring as confusion, in my opinion reigns over the strength in the cash markets. Analysts continue to push back the start date for the seasonal declines in price and increases in production. If the Dollar continues its descent, we could see improvement in pork sales and this could add to the strength in the cash. The October contract is gaining steam and will soon overtake the August contract in volume. There is a wide differential in price between the August and October prices. October settled at 94.50. The Tuesday trade formed an outside candlestick and challenged resistance at 112.975. If price can overcome the Tuesday high, we could test resistance at 114.675. A failure from settlement could see price test support at 111.675. The remainder of the gap is next.
The Pork Cutout Index jumped and is at 119.55 as of 7/18/2022.
The Lean Hog Index increased and is at 114.89 as of 7/15/2022.
Estimated Slaughter for Tuesday is 460,000, which is above last week’s 451,000 and below last year’s 468,000. The estimated total for the week (so far) is 909,000, which is above last week’s 890,000 and below last year’s 926,000.
August Feeder Cattle gap opened higher and rallied to the session high at 179.45, then broke down to the low at 177.775. It consolidated the rest of the session and settled at 178.75. The gap is from the Monday high at 177.225 to the Tuesday low. The rally took price past resistance at 178.95 and settlement was just below it. If price can overtake the Tuesday high, we could revisit resistance at 180.80 and the July 13th high at 181.00. A failure from settlement could see futures re-test the gap. Support then comes in at 175.70.
The Feeder Cattle Index decreased and is at 172.50 as of 7/18/2022.
October Live Cattle is now the lead contract as its volume has exceeded the volume of the August contract. It opened higher, traded down to the low at 140.35 and then grinded higher to the high at 141.50. It settled at 141.10. The low tested support at 140.175 and the high approached resistance at 142.225. A failure from settlement could see price re-test support. Support then comes in at 138.60. If price can overtake the high, we could test resistance at 142.225. The October contract levels has traders thinking higher cash prices down the road, but if cash can’t move higher, we could see futures pull back to support.
Boxed beef cutouts increased as choice cutouts jumped 2.02 to 272.57 and select increased 1.07 to 243.73. The choice/ select spread widened and is at 28.84 and the load count was 133.
Tuesday’s estimated slaughter is 125,000, which is below last week’s 126,000 and above last year’s 117,000. The estimated total for the week (so far) is 250,000, which is below last week’s 251,000 and above last year’s 233,000.
The USDA report LM_Ct131 states: So far for Tuesday in the Texas Panhandle negotiated cash trading has been moderate with light to moderate demand. Compared to last week live purchases traded 1.00 lower at 136.00. In In Kansas, Nebraska and Western Cornbelt negotiated cash trading has been mostly inactive on light demand. Not enough purchases for a market trend in these regions. Last week in Kansas live purchases traded at 137.00. For the prior week in Nebraska live and dressed purchases traded from 140.00- 145.00 and at 230.00, respectively. For previous week in the Western Cornbelt live and dressed purchases traded from 143.50-145.00 and from 228.00-230.00, respectively.
The USDA is indicating cash trades for live cattle from 136.00 – 143.50 and at 224.00 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, July 21, 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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