The October Lean Hogs made an early attempt to rally, testing resistance at 66.55 as it made the high just below it at 66.525. The failure at resistance saw price turn around and make a run towards trendline support down at 65.325. The trendline briefly contained the selling (half hour), then blasted through the trendline to a new low for the week at 62.275. This is just below the 63,325 support level not content to hang out here, Hogs grinded lower and eventually went limit down at 62.00. It settled limit down just above support at 61.80. It is also still within last Mondays range at 69.90 high to 61.50 low. The limit down move puts support in jeopardy of being breached. If weakness prevails on Mondays open, Hogs could slide down to test support 59.825. Support then comes in 58.25 and then 57.025. If support holds, consolidation within Fridays range. The Lean Hog index fell to 79.34 as of 8/14/2019. The Pork Cutout Index ticked lower to 89.42 as of 8/15/2019.
October Live Cattle spent most of the trading session within Thursdays range (99.85 - 98.125). It made the high at 99.375 which is also resistance. It drifted most of the session before a wave of selling came in during the last 15 minutes of trading before settlement. It broke yesterdays low and traded down to a new low for the week at 97.775. It settled just above the low at 98.05. A weaker opening on Monday could see price test support at 97.075. Support then comes in at 96.10. A bounce off of settlement could see price revisit resistance at 99.375. Resistance then comes in at 100.275. The cash market was quiet during the trading session. Boxed beef cutouts were higher at the 9:30 reporting with choice cutouts up 1.73 to 237.85 and select up 2.00 to 212.67. The choice/ select spread narrowed to 25.18 and the load count was 57. Slaughter was 114,000. It brings the total for the week to 577,000. This is much lower than last week's 594,000 and last years 592,000. This was expected with the fire that disabled Tysons huge processing plant in Holcomb, Kansas. The question on traders minds was what would happen on Saturday? With cutouts surging would packers up slaughter levels on Saturday to keep the weekly pre-fire expected level (650,000) intact, thus taking advantage of their unexpected windfall. Or; would they hold back and attempt to push back on the current state of fed supply. Many participants were looking for weekly slaughter to fall to 625,000, so they were looking for packers to try to back up cattle to add weight to the cattle supplies. Wellpackers are taking advantage of the increase in cutouts and decrease in cattle prices to say they will slaughter 74,000 on Saturday. This will bring the weekly total to 651,000, slightly more than the pre-fire expected slaughter level. If boxed beef cutouts remain elevated, packers should continue to keep slaughter levels high and maybe cash and futures can recover to the price levels seen just before the unexpected fire in Tysons plant.
September Feeder Cattle spent the most of the session consolidating within Thursdays trading range. It started the day strong as it opened above Thursdays settlement and traded up to the high of the day at 135.05. This is just below resistance at 135.60 and Thursdays 136.275 high. It grinded lower most of the day before accelerating in the latter part of the day to the session low at 132.00. This took price below Thursdays 132.45 low and the 132.075 support level. It settled just above support at 132.375. A failure from settlement could see price test support at 131.25 and then 129.65. If support holds a retest of resistance at 133.50 and then 134.25 is possible. Resistance then comes in at 135.60. The Feeder Cattle Index declined to 137.60 as of August 15th.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursday, August 22at 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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Senior Market Strategist
Walsh Trading, Inc.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS.THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.