Walsh Trading Daily Insights
Commentary
March Feeder Cattle rallied past resistance at 185.80 to the session high at 186.15. It pulled back and settled at 185.725. The low came in at 184.725. Strong cattle futures helped support Feeders as the strong corn futures couldn’t derail the enthusiasm in the Feeders. The settlement below resistance keeps bulls cautious as the Cattle on Feed Report lurks in the background. It is expected to have bullish overtones but with cattle markets, caution is the name of the game. The rally increases the premium of futures over the cash index which is another reason to be cautious up here, in my opinion. Lots of times as futures rise past the index, a snapback towards the index occurs. We’ll see…. If settlement fails, we could test support at the 184.375 and then the rising 13-DMA now at 183.475. If Feeders can overtake the Wednesday high, we could test resistance at 187.20. Resistance then comes in at 188.95.
The Feeder Cattle Index decreased and is at 178.14 as of 12/20/2022.
February Live Cattle broke out to a new high for the up move as frigid, snowy weather moves through cattle country. Speculators are hoping the severe weather conditions and an expected bullish Cattle on Feed Report (Est. Below) on Friday will lead to a break out in cash prices above 160.00, in my opinion. The weather could impact cattle performance and lead to lighter weights, not what the packers need as they want heavier cattle to compensate for the expected lower numbers going forward. Packers, however, will continue to pull back on slaughter to try to keep control of the retail and producer markets. But, after the holidays, they will need to build their inventory so they may be forced to be aggressive in their purchases of cattle. The rally on Wednesday took price past resistance at 157.25 to the high at 157.975. It settled near the high and above resistance at 157.70. The low was at 155.525. If settlement holds, we could move towards resistance at 159.075. Resistance then comes in at 160.075. A failure from settlement could see price test support at 156.30. Support then comes in at 155.10.
Boxed beef cutouts were mixed as choice cutouts dipped 0.19 to 264.86 and select increased 2.39 to 236.29. The choice/ select spread narrowed and is at 28.57 and the load count was 118.
Wednesday’s estimated slaughter is 122,000, which is above last week’s 118,000 and even with last year. The estimated total for the week (so far) is 346,000, which is below last week’s 364,000 and last year’s 363,000.
The USDA report LM_Ct131 states: Thus far Wednesday in the Southern and Northern Plains negotiated cash trade was at a standstill. In the Western Cornbelt negotiated cash trade was mostly inactive on light demand. Not enough purchases for a market trend in any feeding region. The latest established market in the Southern Plains was last week with live purchases at 155.00. For the prior week in Nebraska and Western Cornbelt live and dressed purchases traded from 155.00-157.00 and at 248.00, respectively. In Colorado the last fully reported market was two weeks ago with live purchases at 157.00.
The USDA is indicating cash trades for live cattle from 155.00 – 157.00 and at 1247.00 on a dressed basis (so far).
U.S. CATTLE ON FEED ESTIMATES
AVERAGE RANGE
CATTLE ON FEED December 97.1 96.5-97.6
PLACED DURING November 95.6 91.8-98.0
MARKETED DURING November 101.0 99.9-101.3
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, December 22, 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
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