Walsh Trading Daily Insights
Commentary
June Lean Hogs came under intense pressure on Wednesday as traders caved after a strong open that saw price test resistance at the 50 –DMA now at 87.75. The strong open saw price reach a new high at 87.825 and the ensuing collapse took price to the low at 84.325. Settlement came in at 84.875. The selling took price below the 8-DMA now at 84.75, and the positive is that settlement was above this level. The price action created a bearish engulfing candle, putting more pressure on bullish traders. If price falls below the 8-DMA on Thursday, we could test support at 83.325. If futures reclaim resistance at 85.325, we could once again challenge resistance at the 100-DMA, now at 86.325. We have exports before the open on Thursday and they have been for the most part positive for producers.
The Pork Cutout Index increased and is at 83.26 as of 5/16/2023.
The Lean Hog Index increased and is at 77.17 as of 5/15/2023.
Estimated Slaughter for Wednesday is 466,000, which is above last week’s 465,000 and below last year’s 475,000. The estimated total for the week (so far) is 1,400,000, which is above last week’s 1,384,000 and below last year’s 1,418,000.
August Feeder Cattle opened higher and as Live Cattle showed weakness it came under pressure and traded to the low of the day at 230.325. With corn crashing, Feeders were able to quickly shake off the decline and raced to the session high at 232.05. It consolidated the rest of the session and settled in the middle of the range at 231.15. The rally failed to take out the April 28th high at 232.225 and settlement was just below the key level at 231.175. The price action formed an outside candlestick after Tuesday’s narrow candle. Are Feeders getting ready to make move? A rally past the April 28th high could see price test resistance at 233.10. A failure from settlement could see price test support at 229.825. A continuation lower could see price come down to test support at 228.05 – 227.80.
The Feeder Cattle Index up ticked and is at 202.18 as of 5/16/2023.
August Live Cattle opened higher and traded down to the low at 161.50. This tested support at 161.75 and bullish traders came in and bid up price the rest of the session to the high at 163.175. It settled near the high at 163.125. Traders seemed to be nervous early as cutouts have been weak and cash has been quiet so far this week. Worried that packers would take price down this week, bears were in early control. But cash activity saw prices coming in at steady to last week and a relief rally took place. The rally took price past the key level at 162.725 and settlement was above it. A rally past the high could see price test resistance at the declining 21-DMA now at 163.55. Resistance then comes in at 164.90. A failure below 162.725 could see price revisit support at 161.75. Support then comes in at 160.75.
Boxed beef cutouts were lower as choice cutouts decreased 1.32 to 298.15 and select declined 1.46 to 282.89. The choice/ select spread widened and is at 15.26 and the load count was 120.
Wednesday’s estimated slaughter is 126,000, which is even with last week and above last year’s 123,000. The estimated total (so far) for the week is 379,000, which is below last week’s 380,000 and above last year’s 373,000.
The USDA report LM_Ct131 states: Thus far Wednesday negotiated cash trade was limited on light to moderate demand in all feeding regions, however not enough purchases in any feeding region for an adequate market test. The latest established market was last week with live purchases in the Southern Plains at 170.00. Last week in Nebraska, live purchases traded mostly at 176.00 with dressed purchases at 280.00. For the prior week in the Western Cornbelt, live purchases traded from 175.00-177.00 with dressed purchases at 280.00 on a light test.
The USDA is indicating cash trades for live cattle from 170.00 – 177.00 and from 275.00 – 280.00 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, May 18, 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.