Walsh Trading Daily Insights
Commentary
March Feeder Cattle couldn’t handle success on Wednesday. It made a new high for the recent up move at 186.575 and promptly turned lower and kept on going until it reached the Friday low at 182.70. It settled nearby at 183.25. The low touched and bounced off support at the same level. This breakdown occurred even as corn traded lower. Corn turned higher mid-session and feeders drifted. Go figure… The cattle inventory report was a positive report in my opinion but I think Wednesday was trade in fear of Fed day. With the Fed 2-day meeting ending at 1pm CST traders thought … let’s get out??? And once the selling started it couldn’t stop… Most markets behaved in this manner (esp. Crude oil) in front of the Fed. Now that the Fed is out of the way?? The price action formed a Bearish Engulfing Candlestick pattern… It will make for an interesting end to the week. If Feeders hold settlement, we could re-test resistance at 184.375. Resistance then comes in at 185.80. A failure from the low could see price breakdown and test support at the 100-DMA now at 181.10 and nearby support at 180.80.
The Feeder Cattle Index down ticked and is at 180.37 as of 01/31/2023.
April Live Cattle opened higher at the session high (163.30). It traded down to the session low at 162.00 and then drifted near the low to settle at 162.225. Once again, the Fed fear is, in my opinion, the cause of the lackluster trading in cattle futures as I believe the Cattle Inventory Report is bullish for cattle. Yes, it was in line with expectations, and we did have a nice rally in front of the report, but the reality is, cattle numbers are down, at levels not seen since the early 1960’s in at least one category. And yes, it could be said that the cattle rallies have been all about rally then trade lower, then rally etc… etc… etc… but cattle has been and should continue in an uptrend, in my opinion. The situation going forward is going to be about the weather. We all need to pay attention to and see if drought conditions are improving or not. If not, will they continue to cull females and if conditions are improving are producers’ game enough to hold them back to breed after all the pain and high feed costs, they have been subject to. If drought conditions don’t improve, they may continue to cull the herd, and this could delay the inevitable (in my opinion) slaughter shrinkage in the near-term. Some areas have improved, but there is a way to go in others… If they determine the grass is good to go and if hay can cheapen …. Off to the races?? We’ll see… If settlement holds, we could re-test resistance at 162.725. Resistance then comes in at 164.90. A failure from settlement could see price test support at 161.75 and the rising 8-DMA is now at 161.65. Support then comes in at the rising 13-DMA now at 160.80. Exports are out before the open on Thursday.
Boxed beef cutouts were lower as choice cutouts declined 1.02 to 265.07 and select decreased 0.14 to 252.78. The choice/ select spread narrowed and is at 12.29 and the load count was 121.
Wednesday’s estimated slaughter is 127,000, which is even with last week and above last year’s 120,000. The estimated total for the week is 375,000, which is below last week’s 378,000 and above last year’s 362,000.
The USDA report LM_Ct131 states: So far for Wednesday negotiated cash trade has been at a standstill in the Southern Plains and Nebraska. In the Western Cornbelt negotiated cash traded has been mostly inactive with very light demand. Not enough purchases for a market trend. Last week in the Southern Plains live purchases traded at 156.00. In Nebraska last week, live and dressed purchases traded from 153.00-156.00 and at 248.00, respectively. Last week in the Western Cornbelt live and dressed purchases traded from 152.00-157.00 and at 248.00, respectively.
The USDA is indicating no cash trades for live cattle 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, February 02, 2023 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
888.391.7894
Fax: 312.256.0109
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