Walsh Trading Daily Insights
Commentary
If you would like to receive more information on the commodity markets, please use the link to join our email list – Sign Up Now
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, October 22, 2024, at 3:15 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.
Hogs Drift While Cattle Markets Bounce Back
December Lean Hogs opened higher and rallied to the session high at 78.375. It couldn’t overtake the Thursday high and reversed course, working lower to the low at 77.275. The breakdown failed to take out the Thursday low and the result was an inside candlestick formation. The price action formed a small bodied candle (Dojis) for the second day in a row indicating (along with the inside candle) traders are uncertain the market can continue to grind higher. It is starting to pull away from the Bollinger band but was able to hold the 50-DMA which is now at 77.375 for the second day in a row. But it is stuck at the 77.80 key level and was unable to challenge the 78.80 resistance level for the second day in a row. Hence, the indecision in the price action( in my opinion). The cash market remains in a tight range with the cutout index ranging from 94.00 to 96.00 and the cash index from 83.80 to 84.90. Slaughter continues to be smaller than last year(even though we saw some improvement) and demand from exports and the consumer is strong. You would think with the lower slaughter, production would fall, but it hasn’t as weights are still above last year, which is likely balancing supply and demand, keeping the cash prices in the tight range they have been in. The seasonal is for supplies to increase and demand to falter in the coming weeks. The cutout has been holding together rather well for this time of year which has helped push futures higher but the question is can it last? If price breaks down from settlement, it could test support at the 50-DMA. A breakdown from here has support at rising 8-DMA now at 76.80. Support then comes in at 76.175. If price pushes past resistance at 77.80, we could test resistance at 78.80. Resistance is next at 79.80.
The Pork Cutout Index increased and is at 94.97 as of 10/17/2024.
The Lean Hog Index ticked lower and is at 83.84 as of 10/16/2024.
Estimated Slaughter for Friday is 481,000, which is below last week’s 484,000 and above last year’s 480,948. Saturday slaughter is expected to be 200,000, which is above last week’s 172,000 and below last year’s 209,285. The estimated total for the week (so far) is 2,613,000, which is above last week’s 2,584,000 and below last year’s 2,615,899.
January Feeder Cattle is now the lead contract on the continuous chart as its volume has surpassed the volume of the November contract. It opened higher at the low at 243.275 and rallied most of the session to the high at 246.15. It dipped into close and settled at 245.50. With a firming Feeder Cattle Index and January trading at a fairly steep discount to the index, traders pushed futures higher narrowing the discount to the index. The rally took price through resistance at 245.75 but it held as settlement was below it. This keeps bullish traders on edge as futures even though it was a strong session couldn’t overcome resistance. The Feeder index has been choppy this week, pulling back from last week’s high and now after the close the CME showed the index at a new high for the recent up move, which may embolden traders on Monday. Producers have been telling me they have been impressed with the strength in the Feeder weight cattle. Futures traders are wary though as we near the all-time highs, remembering the collapse in the futures and then the cash last September/ October. If price holds settlement, it could re-test resistance at the 245.75. Resistance then comes in at the 21-DMA now at 246.90. A breakdown settlement could see a test of support at 242.475. Support then comes in at the rising 50-DMA now at 241.875.
The Feeder Cattle Index increased and is at 250.80 as of 10/17/2024.
December Live Cattle opened lower, made the low at 186.25 and traded up to the session high at 187.675. It stalled just below resistance at 187.725, drifting into the close to settle at 187.325. Friday’s session was a nice bounce back day after the pressure the market was under this week. Futures are consolidating with the high at 188.55 on October 11th and the low established just on Thursday at 185.20. The high on the 11th was a new high for the recent up move and the low was a panic type sell-off as traders seeing where we are on the charts, pressed prices lower after an attempt to rally on Manday failed (which also happened to allow the packer to get cash prices at mostly steady prices on Thursday in the Northern region). The high pressured strong trendline resistance on the continuous chart and I believe traders were reluctant to push price above that line for the implications that could possibly mean technically. The trendline was at 188.15 on the 11th and Friday it was at 188.075. It will remain at 188.075 for Monday and on Friday the bulls couldn’t challenge the trendline. So be careful trading in this area. Remember at this moment the cattle futures are still trading near all-time highs on the continuous chart while ags, Crude Oil, Natural Gas, the Rbob, and heating oil are all well off their all-time highs. If you are fighting inflation, where do you need to fight. Yep… the cattle markets. So, there is a reluctance in my opinion at these levels. That doesn’t mean it won’t go higher but it will take something to lead it higher, in my opinion. With prices near all-time highs on the futures and at critical resistance, next week will be interesting. We’ll see!… If price can’t hold settlement, it could test support at the rising 21-DMA now at 186.125. Support then comes in at 185.75. If settlement holds, we could see price re-test resistance at 187.725. Trendline resistance then comes in at 188.075. A rally past here could test resistance at 190.075.
Boxed beef cutouts were higher as choice cutouts increased 1.39 to 320.65 and select increased 0.68 to 294.20. The choice/ select spread widened and is at 26.45 and the load count was 126.
Friday’s estimated slaughter is 106,000, which is even with last week and below last year’s 117,460. Saturday slaughter is expected to be 14,000, which is above last week’s 6,000 and below last year’s 18,801. The estimated total for the week (so far) is 608,000, which is above last week’s 586,000 and below last year’s 637,931.
The USDA report LM_Ct131 states: Thus far for Friday in the Southern Plains negotiated cash trade has been slow on light demand. On Thursday in the Southern Plains live FOB purchases traded at 188.00. In Nebraska and the Western Cornbelt negotiated cash trade has been slow on light demand. On Thursday in Nebraska and the Western Cornbelt live purchases traded from 187.00-188.00, while dressed purchases traded at 296.00.
The USDA is indicating cash trades for live cattle from 185.00 – 189.00 and 295.00 – 304.00 on a dressed basis (so far).
**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.
