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Livestock Report


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Walsh Trading Daily Insights

Commentary

December Lean Hogs made a new high for the up move reaching 70.70 before breaking down to the session low at 68.825. This was a test of support at 68.90 and it held with futures rallying into the close and settling at 69.80. This is right at the key level at 69.80. The high was just shy of resistance at 70.90. The key level at 69.80 will be the pivot for trade on Monday in my opinion. A failure from settlement could see support revisited at 68.90. Support then comes in at 67.80 and 66.55. A breakout above settlement could see resistance tested at 70.90. Resistance then comes in at 71.325 and then 71.80. Demand continues to look good as cutouts and cash hogs remain strong. Export sales were down as the Chinese were on holiday and their purchases sagged as a result. They most likely were back in the market this week. (See trade idea).

The Pork Cutout Index jumped and is at 96.56 as of 10/15/2020.

The Lean Hog Index increased and is at 78.49 as of 10/14/2020.

Estimated Slaughter for Friday is 487,000 which is even with last week and above last years slaughter at 483,000. Saturday slaughter is expected to be 264,000, which is below last years 289,000 and above last years 281,000. The weekly estimated total is expected to be 2,688,000 which is below last weeks 2,730,000 and last years 2,723,000.

January Feeder Cattle is now the lead contract for Feeder Cattle as its volume has surpassed the November volume. January Feeder Cattle took one to the chin on Friday and it landed hard on the canvass. It opened at the high (136.35) and was repeatedly knocked down to the ground making the low at 128.35. It was able to survive a knock out blow as it didnt go limit down and it settled off the low at 129.325. This has created separation from the Feeder Cattle Index as the index coming into the session was at 140.91. This makes futures cheap to cash and as I write this article todays update hasnt arrived. Will this crash in the futures cause cattle buyers to pull back their bids in buying feeder cattle and bring down the index to the futures or will this be supportive to futures going forward? Settlement was below the key level at 129.65 and the low was below support at 128.875. Price must bounce back early on Monday as a weak open could keep Feeders in a negative tone going forward, in my opinion. Support is at 128.875,127.575 and then 125.90. Resistance is at 129.65, 131.10 and then 132.075.

The Feeder Cattle Index is at 140.91 as of 10/14/2020.

December Live Cattle continued its breakdown and made a new low for the down move, making the low at 108.125. This took price below support at 108.65 and it settled just below support at 108.625. Settlement was below the 50 DMA (109.35) and the key level at 109.60. Price must overtake these levels or more weakness will prevail in cattle, in my opinion. The weakness in futures, pressured the cash market and it traded weaker on limited trading on Friday. Live cattle traded at 106.00 107.00 and dressed cattle traded at 166.00 167.00. There seems to be fear the resurgence of the Wuhan virus as colder weather arrives will dampen demand for beef and possibly slow down slaughter at processing plants. Resistance is at 112.35, 113.90 and then 114.65. Staying below support at 108.65 could see price retest the new low. Support then comes in at 107.30 and then 106.025. Resistance is at 106.65, the 50 DMA, 109.60 and then 110.80.

Boxed beef cutouts were lower with choice cutouts down 0.45 to 210.03 and select down 2.98 to 193.52. The choice/ select spread widened to 16.51 and the load count was 127.

Fridays estimated slaughter is 116,000, which is above last lasts 112,000, and last years 108,000. Saturday slaughter is expected to be 62,000, which is above last weeks 53,000 and below last years 72,000. The estimated weekly total is expected to be 654,000. This is above last weeks 637,000 and last years 643,000.

The USDA report LM_Ct131 states: Thus far for Friday negotiated cash trading in Kansas, Nebraska, and the Western Cornbelt has been mostly inactive on light demand. In the Texas Panhandle negotiated cash trading has been at a standstill. Not enough purchases in any region for a full market trend. The last reported market in the Southern Plains was on Wednesday at 108.00. In Nebraska live purchases moved at 108.00 on Thursday and dressed purchases moved at 169.00 on Wednesday. In the Western Cornbelt on Thursday, live purchases moved from 105.00-107.00 and dressed purchases moved from 167.00- 168.00.

Trade Suggestion(s)

Hogs Buy the June 100 call and sell the June 110/100 put spread for negative 860.

Risk/Reward

Max risk is $560.00 per contract plus commissions and fees.

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, October 22, 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.

Sign Up Now

**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

Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.

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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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