Walsh Trading Daily Insights
Commentary
March Feeder Cattle opened strong and raced to the high of the day at 188.20. It wasn’t able to handle the success and reversed course, sinking to the session low at 185.55 as strength in corn put fear back in traders’ minds. A pullback in corn and a resurgence in the fats turned around Feeders and the rally took price back to the upper end of the range and it settled at 187.20. The wild day formed an outside candlestick and a positive settlement right at the key level at 187.20. The high, however, couldn’t overtake the February 7th high at 188.575 keeping Feeders in its recent consolidation pattern. The low was just below support at 185.80 and the rising 13-DMA now at 185.60. This confluence of support contained the selling and gives hope to the bulls, in my opinion. The Feeder Cattle market showed its hope for stronger prices with its reaction to how the fats traded and the potential fear if corn prices continue to rally and if the fats can’t sustain its strength. If Feeders hold settlement, we could test resistance at the February 7th high and then nearby resistance at 188.95. Resistance then comes in at 190.20. A failure from settlement could see price breakdown and revisit the Monday low. Support then comes in at the rising 50-DMA now at 184.475.
The Feeder Cattle Index increased and is at 183.33 as of 02/10/2023.
April Live Cattle gap opened higher and broke out to a new high for the up move, reaching 165.25 on Monday. This was just above resistance at 164.90 and the market didn’t handle the success well. It reversed course and closed the gap, making the session low at 164.125. This was just above the rising 8-DMA now at 164.05 and bulls used this to propel price back to near the high and it settled just off the high at 165.10. This is above the key level and puts resistance at 166.975 in traders’ crosshairs. Excitement over the packer aggressive buying on Friday afternoon had traders seeing sugar plums in their future. Packer buying habits have reverted to before the pandemic when they were putting pressure on producers in a time of strong cattle supplies by buying most of their cattle at the end of the week. This enabled them to pick off the weak and keep their average prices in line. Now, however, this looks like it is starting to work against them in a time of shorter supply in the making. They need to fulfill orders as consumer demand for beef is still strong as the economy is still moving forward and cutouts are still enabling packers to make money, in my opinion. They need the cattle, plain and simple, and the cattle may not be there in the numbers they can exploit, in my opinion. I think that’s what bullish traders are going with, and they are expecting cash to continue its upward movement, even if packers can soften the gains going forward. If settlement holds, we could move towards resistance at 166.975. A failure below 164.90 could see price revisit support at the 8-DMA. Support then comes in at the rising 13-DMA now at 163.25.
Boxed beef cutouts were higher as choice cutouts increased 0.29 to 265.95 and select increased 1.92 to 256.24. The choice/ select spread narrowed and is at 13.74 and the load count was 116.
Monday’s estimated slaughter is 126,000, which is above last week’s 120,000 and last year’s 122,000.
The USDA report LM_Ct131 states: So far for Monday negotiated cash trading has been at a standstill in the Southern Plains, Nebraska and Western Cornbelt. Last week was the latest established market in these regions. In the Texas Panhandle live purchases traded at 160.00. In Kansas live purchases traded from 160.00-161.00. In Nebraska live and dressed purchases traded from 157.00-160.00 and at 254.00, respectively. In the Western Cornbelt live and dressed purchases traded at 160.00 and at 254.00, respectively.
The USDA is indicating no cash trades for live cattle and 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 16, 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
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
tested support at the
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall not be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.