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Livestock Report


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Walsh Trading Daily Insights

Commentary

August Lean Hogs continued lower on Wednesday, trading down to 47.90 and settling nearby at 47.95. Hogs are in a trading range with the low at 47.525 and the high at 50.35. A break below the low end of the trading range keeps the down trend intact and sets the stage for a possible test of lower support levels. Support on Thursday is at 46.30 and then 43.05. Resistance is at 49.35, 50.475 and then 51.80. The Pork Cutout Index decreased and is at 64.03 as of July 7, 2020. The Lean Hog Index increased and is at 45.90 as of July 6, 2020. Estimated Slaughter for Wednesday is at 467,000. This is lower than last weeks slaughter of 469,000 and last years slaughter at 482,000.

China has continuing problems with the African Swine Fever. Southern China is reported to have more cases of the disease although the government has not reported on the matter. Their hog prices are rising once again as piglet prices are soaring making life difficult for smaller farmers. China wants to modernize their hog production and move towards commercialization of the industry into large producers. The continued proliferation of the disease and resultant higher hog prices is helping their cause but in the short run is hurting the consumer as pork prices continue to surge. Consumers are once again starting to back-off from eating pork as prices rise. China is auctioning 20,000 MT of frozen pork from its state reserves on Friday to combat the rise in consumer prices. It has sold almost 400,000 MT of pork from its reserves this year in an attempt to curb prices and maintain supplies. Is it enough? They have increased their imports of pork to unprecedented levels, yet are pulling back from taking delivery of pork from international processors that have tested positive for the corona virus. Their need is great for pork and they have tested imports for the virus without having any positive virus results. Yet they continue to play games, in my opinion with their trading partners and their people. What are they trying to accomplish? They need pork and cant get enough of it but they still play games. We have pork and plenty of it. And it is cheap and of high quality. If they really care about their people they would take as much pork from us as they can get shipped. This would help their people and our producers. Yet, they play games.

August Feeder Cattle broke down and tested support at 133.50, making the low just below it at 133.10. It settled at 134.05. It continued its rejection of the 200 DMA (135.70) as it makes its way back to the middle of the 138.80 128.325 trading range. Thursday has support at 133.50, the 50 DMA at 132.67 and then 132.075. Resistance is at 134.25, 135.60, the 200 DMA, 136.75, 138.95 and then 140.775. The Feeder Cattle Index hasnt updated yet and is at 130.13 as of 7/6/2020.

August Live Cattle sagged some more on Wednesday. It traded down to 98.925 and settlement was at 99.15, just below support at 99.375. Support for August is at 98.125, 97.075 and then 96.10. Resistance is at 99.35, 100.275 and then 101.625. Boxed beef cutouts sank on Wednesday with choice cutouts down 1.47 to 203.83 and select down 1.32 to 195.52. The choice/ select spread narrowed to 8.31 and the load count was 178. Wednesdays estimated slaughter is 120,000, below last weeks 121,000 and above last years slaughter of 118,000. The USDA report LM_Ct131 states: Thus far Wednesday trade and demand was moderate in the Southern Plains. Compared to Tuesday in the Texas Panhandle, live purhcases traded steady at 95.00. Compared to Tuesday in Kansas live purchases traded steady to 1.00 lower from 94.00-95.00. Trade was slow on moderate demand in the Northern Plains. In Nebraska a few early live purchases traded from 95.00-96.00, however not enough for an adequate market test. Last week in Nebraska live purchases traded from 95.00-96.00 with dressed purchases from 157.00-160.00 on Tuesday. Last week in Colorado, live purchases traded mostly at 96.00. Trade was slow to moderate on moderate demand in the Western Cornbelt. Compared to Tuesday, live purchases traded steady to 2.00 higher from 99.00-100.00. A few dressed purhcases traded from 157.00-158.00, however not enough for an adequate test. The latest established market in the Western Cornbelt was on Monday at 160.00.

Trade Suggestion(s)

Risk/Reward

Futures N/A

Options N/A

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, July 9, 2020 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.

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**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

bdicostanzo@walshtrading.com

www.walshtrading.com

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About the author


Ben DiCostanzo
Senior Market Strategist
Walsh Trading

I began my career in the Securities industry working as a runner on the floor of the New York Stock Exchange while I attended Pace University. I then started working for Salomon Brothers in their Government Bond Trading arena. After graduating from Pace University with a degree in Accounting, I transferred to Chicago and became a member of the Chicago Mercantile Exchange utilizing my experience to execute trades and manage risk for institutional clients as a broker for Salomon Brothers on the trading floor. I then embarked to trade for my own account in the stock indices pits as a local before moving off the floor to aid and assist individual clients in their trading endeavors. I now work at Walsh Trading holding a series 3 broker’s license whose duties include being the firm’s Chief Market technician.

I understand that every client's needs are different, and I pride myself in tailoring my service to each client's unique circumstances and needs. Individual client experience, risk tolerance, and capital all play a role in how I approach the markets. I am involved in all markets using technical analysis to find opportunities. My approach is driven by the principles of capital preservation.

My trading philosophy is that if you can recognize and manage the risk, you have a better chance to be successful in trading. I advise clients to always use stops as money management in my opinion is the most important ingredient in trading commodities.

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