Commentary
August Live Cattle continued its recovery on Wednesday, trading higher and testing resistance at 174.425, making the high just above it at 174.55. It settled below resistance at 173.875 with the low coming in at 172.30. Cash has traded lower in the South but hasn’t established any real volume and all is quiet in the North. Cutouts have been in decline and packers are likely determined to bring down the cash price with a short slaughter week for next week. Producers are trying for at least steady and are waiting for the end of the week, hoping packers will waver and get more aggressive. Traders have been fairly aggressive in the futures market, and this gives producers relief because with futures firm, packers could be on the short end of the stick as they always like to see pressure on futures in front of a short kill week. This could bode well for the summer as a positive June could limit the expected seasonal decline in the cash price. If futures can overtake resistance, we could challenge the next level at 175.95. A failure from settlement could see support revisited down at 172.75.
Boxed beef cutouts were lower as choice cutouts declined 1.33 to 327.90 and select decreased 1.75 to 296.68. The choice/ select spread widened and is at 31.22 and the load count was 105.
Wednesday’s estimated slaughter is 126,000, which is above last weeks and last year’s 125,000. The estimated total for the week (so far) is 377,000, which is below last week’s 378,000 and even with last year’s.
The USDA report LM_Ct131 states: So far for Wednesday 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 on light demand. Not enough purchases in any of these regions for a market trend. In Kansas the last reported market was on Tuesday with live purchases at 178.00. Last week in the Texas Panhandle live purchases traded at 180.00. For the prior week in Nebraska live and dressed purchases traded from 182.00- 185.00 and at 290.00, respectively. For the previous week in the Western Cornbelt live and dressed purchases traded from 184.00-185.00 and at 290.00, respectively.
The USDA is indicating cash trades for live cattle from 176.00 – 184.00 and at 290.00 on a dressed basis (so far).
August Feeder Cattle gap opened higher as corn futures continued to get pounded. The rally stalled and Feeders fell back and closed the gap, trading to the low at 238.00. It was able to right itself and rallied to the high at 240.70. It could go no further, stalling just below resistance at 240.875 and settled at 240.25. With corn weak and cattle firm, it was somewhat surprising Feeders couldn’t jump past resistance and surge. Maybe Feeders are a little overdone with it trading at a rich premium to the cash index. It also is operating under a Bearish Engulfing pattern from its failure at just under the all-time high for the lead contract. Today’s action set up a potential bearish Hanging Man candlestick. From a bullish perspective, the rally we have seen is from a bullish Island Reversal pattern created from last week’s price action. What a battle! Taking shape! If settlement fails, we could test support at 238.35, 237.25 and then the rising 21-DMA now at 236.80. Resistance is at 240.875 and then the recent high from the June 13th breakdown candle at 240.925. If this goes, we could test resistance at 242.475.
The Feeder Cattle Index increased and is at 226.01 as of 6/27/2023.
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 29, 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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