Walsh Trading Daily Insights
Commentary
July Lean Hogs consolidated in the lower end of Monday’s range, making the high at 91.80 and the low at 90.00. Settlement was at 90.60. The price action took price below support at 90.40 with settlement above it. Monday’s rally saw futures get ahead of itself as it reached an extreme premium to the cash index and the snap back was the response to get price more in line with cash. Tuesday continued that snap back with the breakdown to 90.00. July becomes both the lead contract and the spot contract on Thursday as the spot contract (June) expires on Wednesday. With June out of the way, traders will likely continue to focus on the relationship of futures to cash and want see a surge in cash to justify their faith in the futures contract. If settlement holds, Hogs could test the Tuesday high. A rally above the high could see a test of resistance at 92.375. If price falls below 90.40, a test of the Monday low (89.70) is likely, in my opinion. Support then comes in at 88.325.
The Pork Cutout Index dipped and is at 86.46 as of 6/12/2023.
The Lean Hog Index increased and is at 84.73 as of 6/09/2023.
Estimated Slaughter for Tuesday is 470,000, which is above last week’s 469,000 and even with last year. Monday slaughter was revised lower to 457,000. The estimated total for the week (so far) is 927,000, which is below last week’s 936,000 and last year’s 931,000.
August Feeder Cattle is under the auspices of a Bearish Engulfing Candlestick formation. Tuesday saw price test support at 237.25, making the low at 237.55 as corn showed early strength. The strong corn couldn’t take down Feeders and when corn started to falter, bulls took control of Feeders and price rallied. It traded up to test resistance at 240.875, making the high at 240.925 and pulling back to settle under resistance at 240.45. The past 4 sessions have seen the August Feeder Cattle trade in a range after the Bearish Engulfing Candle, with the high made on Tuesday and the low on Friday at 236.825. Traders so far have been reluctant to pressure the August contract as strong support by the rising 21-DMA now at 236.975 lurks below. It is important to the near-term direction of Feeder Cattle, in my opinion. A failure below here could see price breakdown and test support at 235.95 and then 234.475. If the Tuesday high is taken out, we could challenge resistance at 242.475 and then the 245.175 high. The all-time high (lead contract) on my continuous chart is nearby and stalled the rally at 245.75. We’ll see what happens if that is breached.
The Feeder Cattle Index surged and is at 226.18 as of 6/08/2023.
August Live Cattle is also operating under a Bearish Engulfing candlestick and Monday’s price action created a Bullish Engulfing Candlestick. The Bearish formation is likely stronger as it comes from an all-time high and the bullish one comes after a short pull back. However, we are in an uptrend. The battle has begun. With early pressure taking cattle lower, price moved towards the Monday low and rallied. The low came in at 171.925 and bulls came back into the market and grinded price higher with a surge at the end of the session to the high at 174.175. Settlement was at 173.925. The rally stopped just shy of resistance at 174.425 as time expired for the day with futures on its high. Cash has been slow to trade, with some light trading on a dressed basis so far. If price can push past resistance at 174.425, it could test resistance at 175.95. A failure below 172.75 could see price revisit the Monday low at 171.30. Support then comes in at 170.375.
Boxed beef cutouts were mixed as choice cutouts increased 0.56 to 337.99 and select declined 0.76 to 309.48. The choice/ select spread widened and is at 28.51 and the load count was 137.
Tuesday’s estimated slaughter is 126,000, which is above last week’s 125,000 and last year’s 124,000. Monday’s slaughter was revised lower to 122,000. The estimated total for the week (so far) is 248,000, which is above last week’s 246,000 and below last year’s 244,000.
The USDA report LM_Ct131 states: So far for Tuesday in the Southern Plains and Nebraska negotiated cash trading has been at a standstill. In the Western Cornbelt negotiated cash trading has been mostly inactive with very light demand. Not enough purchases for a market trend. The latest established market was last week in all regions. In the Texas Panhandle live purchases traded at 185.00. In Kansas live purchases traded at 186.00. In Nebraska live and dressed purchases traded from 189.00-192.00 and at 300.00, respectively. In the Western Cornbelt live and dressed purchases traded at 190.00 and from 298.00- 300.00, respectively.
The USDA is indicating no cash trades for live cattle and from 287.00 – 298.00 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 15, 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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