Walsh Trading Daily Insights
Commentary
October Lean Hogs opened higher, rallied to the high at 97.525 by mid-morning, and failing to take out the July 28th high at 97.875, it lost its energy and broke down the rest of the session to the low at 95.575. It settled near the low at 95.85. October Hogs continued its trade between the low at 92.425 and the high at 97.875. Pessimism remains that cash will move lower into the October time frame as futures continue to trade at a larger than normal discount to the cash market. Exports are out on Thursday morning before the open and we will see if the higher cutout prices have put a lid on sales. If settlement holds, we could revisit resistance at 97.30. Resistance then comes in at 98.475. A break down from support at 95.30 could see price test support at 93.50.
The Pork Cutout Index increased and is at 128.42 as of 8/02/2022.
The Lean Hog Index decreased and is at 121.57 as of 8/01/2022.
Estimated Slaughter for Wednesday is 469,000, which is above last week’s 468,000 and below last year’s 472,000. The estimated total for the week (so far) is 1,349,000, which is below last week’s 1,385,000 and last year’s 1,355,000.
September Feeder Cattle returned to the norm as corn weakness led to strength in feeders during Wednesday’s trading session. Feeders opened lower and made the session low at 180.925. The market reversed course from here and traded up to the high at 183.225 by mid-morning. It consolidated the rest of the session and settled near the high at 182.90. The trade to the low approached support at 180.80, never challenging it. The rally took price past resistance at 182.70 and settling above it is a positive for Feeder Cattle. If feeders can hold settlement, we could test resistance at 184.375. Resistance then comes in at 185.80. A failure from settlement could see futures revisit support at 180.80. Support then comes in at 178.95.
The Feeder Cattle Index decreased and is at 174.04 as of 8/02/2022.
October Live Cattle was able to push away from the key level at 142.225. It opened higher and made the low at 142.425. It reversed and raced higher and by mid-morning was at the session high at 144.125. It consolidated the rest of the session and settled near the high at 143.95. Packers were aggressive Tuesday afternoon with their cattle purchases and traders believe they are short-bought which could lead to higher prices this week when expectations were for steady prices at best. It looks like packers relied too heavily on purchases with time, calling for them early and with supplies thought to be tight had to jump in to buy needed cattle. With choice cutouts trading rich to select, it looks like producers are current and grading may be in decline forcing packers to bid up for better grading cattle. With gasoline prices declining and a recession in the works, demand for beef has been better than expected. Beef demand usually holds up well during recessions as consumers stay home and eat beef while avoiding expensive restaurants. If price can trade above the Wednesday high, it could work its way higher and approach resistance at 146.825. Price could struggle at the 145.225 level. A failure from settlement could see price pull back towards support at 142.225. Support then comes in at 140.175.
Boxed beef cutouts were lower as choice cutouts decreased 0.52 to 267.95 and select decreased 0.25 to 241.30. The choice/ select spread narrowed and is at 26.64 and the load count was 106.
Wednesday’s estimated slaughter is 124,000, which is below last week’s 125,000 and above last year’s 122,000. The estimated total for the week (so far) is 372,000, which is below last week’s 374,000 and above last year’s 362,000.
The USDA report LM_Ct131 states: So far for Wednesday in Nebraska negotiated cash trading has been slow on moderate demand. Compared to last week live purchases ranged from 140.00-142.00, mostly 2.00 higher at 140.00. Not enough dressed purchases for a market trend. Last week dressed purchases traded at 225.00. In the Western Cornbelt negotiated cash trading has been limited on light demand. In the Southern Plains negotiated cash trading has been mostly inactive on light demand. Not enough purchases in these regions for a market trend. In the Southern Plains the last reported market was on Tuesday with live purchases at 135.00. In the Western Cornbelt the last reported live purchase market was on Tuesday at 143.00. For the prior week dressed purchases traded from 224.00-228.00.
The USDA is indicating cash trades for live cattle from 135.00 – 144.00 and from 225.00 – 232.00 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, August 04, 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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