Walsh Trading Daily Insights
Commentary
July Lean Hogs opened higher and surged, trading up to a new high for the recent up move at 84.90. It settled near the high at 84.65. The low was at 82.475. Anticipation is the name of the game in the Hog futures market in my opinion as traders look for the cash markets to surge higher in the coming weeks. Both June and July futures are back to trading at a strong premium to the Lean Hog index. June expires on June 14th and it settled at 86.725, a large 7.095 handle difference from the index. We’ll have to see the cash market sprint higher in a short period of time. It feels strange that June rallied at a faster pace than the July contract. July has time on its side while June does not. Costco reported that its customers have been buying more pork and chicken than beef recently, so maybe traders are enthused by that. Cutouts however, remain erratic and today’s cutout report showed a decline which isn’t helpful to the cause. A failure from settlement could see price pull-back and test support at 83.325. 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 85.775.
The Pork Cutout Index increased and is at 83.69 as of 6/01/2023.
The Lean Hog Index ticked higher and is at 79.63 as of 5/31/2023.
Estimated Slaughter for Friday 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 gap opened higher and traded to a new high for the up move, reaching 243.80 on Friday. The strong open took price past resistance at 242.475, but it couldn’t sustain the gains and pulled back and traded lower, making the low at 240.70. It settled in the middle part of the range at 241.90. The breakdown to the low closed the gap and created a potential reversal candlestick pattern. A breakdown on Monday could establish an Evening Star Candlestick Pattern and potentially lead to a pullback in Feeder Cattle. A failure from settlement could see price test support at 240.875. Support then comes in at 238.35. If price pushes past 242.475, we could revisit the Friday high. A rally past the high could see price approach resistance at the all-time high on the continuous chart at 245.75.
The Feeder Cattle Index down ticked and is at 208.04 as of 6/01/2023.
August Live Cattle gap opened higher and surged to an all-time high on the continuous chart at 174.25, displacing the previous high from December 2014 at 172.75. The exuberance didn’t last and price broke down trading to the low and closing the gap in the process at 172.25. Price recovered and settled at an all-time high price at 172.90. The price action left the futures with a potentially topping action if it opens weak on Monday. There is euphoria in “cattleland” as packers had to bid up prices to get cattle bought this week. This occurred in all regions, but the excitement was over the fact that Texas and Kansas, which has been weak compared to Iowa and Nebraska (and the reason futures were trading at a discount), surged and traded as high as 180.00 this week. This still leaves futures at a discount but, if those areas can hold their gains, futures could continue to make new all-time highs, in my opinion as it should continue to play catch up to the cash market. Iowa and Nebraska are still way above those regions with highs this week at 190.00 on the mandatory report. We seem to be in a new era for cattle price control as producers have the ball and packers are having a hard time getting it back. A failure to hold settlement could see some consolidation and a pull-back towards support at 170.375. If settlement holds, we could revisit the Friday high. Resistance then comes in (pivot analysis) at 175.20 and then 176.15.
Boxed beef cutouts were higher as choice cutouts jumped 3.49 to 309.93 and select surged 4.61 to 290.93. The choice/ select spread narrowed and is at 19.00 and the load count was 120.
Friday’s estimated slaughter is 124,000, which is above last week’s 118,000 and below last year’s 125,000. Saturday slaughter is expected to be 67,000, which is above last week’s 20,000 and below last year’s 96,000. The estimated total for the week (so far) is 573,000, which is below last week’s 625,000 and last year’s 608,000.
The USDA report LM_Ct131 states: So far for Friday in the Southern Plains negotiated cash trading has been mostly inactive on light demand. In Nebraska and Western Cornbelt negotiated cash trading has been slow with light to moderate demand. Not enough purchases for a full market trend in any region. Thursday was the last reported market in these regions. In the Texas Panhandle live purchases traded from 175.00- 180.00. In Kansas live purchases traded from 178.00-180.00. In Nebraska live and dressed purchases traded mostly from 183.00-188.00 and dressed purchases traded mostly from 285.00- 292.00, respectively. In the Western Cornbelt live and dressed purchases traded mostly from 185.00 -187.00 and dressed purchases traded mostly from 288.00-292.00, respectively.
The USDA is indicating cash trades for live cattle from 171.00 – 190.00 and from 280.00 – 297.00 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 08, 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.