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Livestock Report


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Walsh Trading Daily Insights

Commentary

December Lean Hogs made an early run higher, opening strong and rallying to the session high at 70.825. The rally couldnt be sustained however, as it reversed course and fell to the low of the day at 68.85. Settlement was near the low at 69.20. This looks bad on the surface, but the session just traded within the Tuesday range setting up (in my opinion) Thursday as a possible directional play. We have export sales due out before the open, so this could be the directional catalyst. A strong number could see price overtake the high and move towards the Monday high. A weak number could set off more profit taking and see price break down to test lower support levels. Support is at 68.75, 67.80 and then 66.55. There is trendline support at 67.125. Resistance is at 69.80, 70.80 and then 71.80.

The Pork Cutout Index increased and is at 98.41 as of 10/20/2020.

The Lean Hog Index increased and is at 78.62 as of 10/19/2020.

Estimated Slaughter for Wednesday is 492,000 which is above last weeks 489,000 and below last years slaughter at 493,000. The weekly total (so far) is 1,457,000, which is above last weeks 1,455,000 and below last years 1,470,000.

January Feeder Cattle consolidated within the upper part of the Tuesday range, making the high at 127.625 and the low at 126.075. Settlement was in positive territory at 127.075. We have an inside candlestick formation and a narrow trading range that potentially could lead to a breakout above the high or a breakdown below the low. Support is at 125.90, 122.775 and then 120.50. Resistance is at 127.575, 128.875 and then 129.65.

The Feeder Cattle Index fell and is at 138.36 as of 10/20/2020.

December Live Cattle opened higher and made a weak attempt to trade higher inching past resistance (106.025) to make the session high at 106.175. The market faded from here and traded down to the low at 104.25. It settled at 104.575. Settlement was below the 100 DMA (105.11) and above the 200DMA (103.99). Price consolidated for most of the session within the Tuesday trading range. Cash traded as low as 102.00 on a live basis and 162.00 on a dressed basis. The futures decline is putting pressure on cash prices. Support has to hold or we can see a debacle in cash prices going forward. This is a time where cash and futures normally rally with cutout prices into the holiday season. Unfortunately, with the Wuhan virus stifling the economy and with people still getting sick from the virus, we are not in normal times. The fear is real, but I still believe we will eat beef and meat in general no matter what. It will just be at home and not in restaurants. It wouldnt surprise me to see consumers eating more meat to make some attempt to feel good about their lives. Support is at 104.20, the 200 DMA, 103.00 and then 101.625. Resistance is at 104.85, the 100 DMA, 106.025, 107.30 and then 108.65.

Boxed beef cutouts were lower with choice cutouts down 2.13 to 208.47 and select down 0.76 to 190.91. The choice/ select spread narrowed to 17.57 and the load count was 207.

Wednesdays estimated slaughter is 121,000, which is above last lasts 119,000, and last years 119,000. The weekly total (so far) is 360,000 which is above last weeks 356,000 and last years 355,000.

The USDA report LM_Ct131 states: Thus far for Wednesday negotiated cash trading has been limited on light demand in in the Southern Plains, not enough for a full market trend. The last reported live market was on Tuesday at 106.00. In Nebraska negotiated cash trading and demand have been moderate. Compared to last week, live purchases have traded 3.00 lower from 104.00-105.00 and dressed purchases have traded 4.00- 7.00 lower from 162.00-165.00. In the Western Cornbelt negotiated cash trade has been limited on light demand. Not enough for a full market trend. Last week in the Western Cornbelt live purchases traded from 106.00-108.00 and dressed purchases traded from 167.00-169.00.

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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