Walsh Trading Daily Insights
Commentary
July Lean Hogs gap opened higher and surged, building upon Tuesday’s limit up move. The rally took price just past resistance at the declining 21-DMA now at 83.525 to the session high at 83.775. Settlement was nearby at 83.325 and the low was the opening price at 80.35. The gap is from the Wednesday low to the Tuesday high at 79.525. The 2-day rally has eaten up the declines from the previous 4 and a half days, with today’s rally a buck shy of taking out the May 22nd high. There seems to be enthusiasm returning to the hog complex after a disappointing ruling from the Supreme court on the Proposition 12 lawsuit and an erratic cash market. Traders look like they are betting on a positive change in consumer demand for pork in the US as the grilling season is here and optimism that the seasonal surge in price and decline in slaughter has finally begun. The price rise usually continues into mid-July, while the slaughter decline lasts probably into late June to early July. So, hope is eternal, and the bulls are back but hurdles remain. If cutouts and/ or cash continue their erratic pattern, the wind could be let out of the sails. Settlement was right on the key level at 83.325 so, this will key trade on Thursday in my opinion. A failure from settlement could see price pull-back and test support at the 13-DMA now at 82.275. Support then comes in at 81.70. A continuation higher off the session high could see price test resistance at 85.325. Resistance is nearby at the 100-DMA now at 85.725.
The Pork Cutout Index decreased and is at 82.37 as of 5/30/2023.
The Lean Hog Index decreased and is at 80.08 as of 5/29/2023.
Estimated Slaughter for Wednesday is 480,000, which is above last week’s 472,000 and even with last year. The estimated total for the week (so far) is 963,000, which is below last week’s 1,426,000 and above last year’s 949,000.
August Feeder Cattle traded to a new high for the up move, reaching 239.85 on Wednesday. The high and settlement at 239.175 took out resistance at 238.35, putting resistance at 240.375 in traders’ crosshairs. To have follow-through after Tuesday’s breakout from consolidation is bullish in my opinion. The caveat to this bullishness is the futures price is trading at a steep premium to the Feeder Cattle Index. If price can push past the high, we could test resistance (240.35). Resistance then comes in at 242.475. If price can’t hold settlement, we could see price test support at 238.35. Support then comes in at 237.25.
The Feeder Cattle Index declined and is at 207.18 as of 5/30/2023.
August Live Cattle continued its renaissance, breaking out above resistance at 166.975 to the high at 167.75 and settling near the high at 167.675. The low was at 166.325. The high and settlement is a new high for the up move and the highest the lead contract (continuous chart) has been since December of 2014. Futures are still playing catch-up to the cash market as last week’s average was 177.94 and so far this week cattle trade has been subdued as packers are playing the hope trade and want to buy cattle on a break in the futures. Time is running out, however, and producers don’t seem to be eager to sell. Demand is still strong for beef and grocers are in the market buying for Father’s Day and then the 4th of July celebrations. With many seeing a tight supply of cattle, producers finally feel they are in the driver’s seat and are looking to capitalize on the situation. A rally past the Wednesday high could see price test resistance at 168.625. resistance then comes in at 170.375. A failure to hold settlement could see some consolidation and a pull-back to now support at 166.975. Support then comes in at 164.90.
Boxed beef cutouts were mixed as choice cutouts increased 0.88 to 305.84 and select declined 0.62 to 287.15. The choice/ select spread widened and is at 18.69 and the load count was 137.
Wednesday’s estimated slaughter is 127,000, which is above last week’s 122,000 and below last year’s 128,000. The estimated total for the week (so far) is 255,000, which is below last week’s 373,000 and last year’s 258,000.
The USDA report LM_Ct131 states: So far for Wednesday in Nebraska negotiated cash trading has been limited on light demand. A few dressed purchases traded from 280.00-285.00. In the Western Cornbelt negotiated cash trading has been inactive on very light demand. In the Southern Plains negotiated cash trading has been at a standstill. Not enough purchases for a market trend in any region. The latest established market in all regions was last week. In the Texas Panhandle live purchases traded from 170.00-171.00. In Kansas live purchases traded at 171.00. In Nebraska live and dressed purchases traded from 180.00-182.00 and from 280.00-286.00, respectively. In the Western Cornbelt live and dressed purchases traded at 182.00 and 285.00, respectively.
The USDA is indicating cash trades for live cattle at 171.00 and from 280.00 – 283.00 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, June 01, 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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