The February Lean Hogs contract gap opened higher and rallied early in the trading session as China claims it will waive tariffs on some pork imports from the US. Individual companies will have to apply for a waiver and the Chinese havent specified an amount to be exempted. The excitement over the new withered rather quickly as the test of resistance at 69.90 held despite price breaching it with the high at 70.05. The reversal saw price break down below the 100 DMA at 67.61 making the low at 67.275 and settling at 67.55. Hogs remain in a trading range with the high end at 70.05 and the low end at 65.40 with Fridays trade putting price in the middle of the range. The Chinese words were vague and the initial euphoria didnt last because there werent any specific details for traders to latch onto and its been said before by the Chinese. They have holidays coming up where pork is consumed in great quantities so they need to bring in plenty of pork to satisfy consumers needs for the holiday season. A break down below the low could see price test support at 66.55. If settlement holds, price could revisit the Friday high. The Lean Hog index ticked higher and is at 58.34 as of 12/4/2019. The Pork Cutout Index was higher and is at 81.37 as of 12/5/2019.
The February Live Cattle held fairly steady on Friday, trading within the Thursday range. It settled at 124.975. A break down below settlement could see support re-tested at 124.30. A failure from here could see the 122.80 support level tested. A breakout above settlement could see resistance tested at 125.80. Resistance then comes in at 126.625. Cash traded this week (so far) from 118.00 to 119.50 on a live basis. It traded between 187.00 189.00 on a dressed basis with the bulk trading on Friday at 188.00 (so far). Boxed Beef cutouts were lower on light to moderate demand and heavy offerings. Choice cutouts fell 1.04 to 224.56 and select dropped 0.82 to 207.30. The choice/ select spread narrowed to 17.26 and the load count was 132. Slaughter was 121,000. Estimated slaughter for Saturday is 81,000 to bring the weekly estimate to 679,000.
January Feeder Cattle tested support at the 100 DMA (139.98), making the low just above it at 140.125. It rallied and made the high at 141.95 right at the 8 DMA (141.93). It settled at 141.55. Price is locked in a battle between the 200 DMA (142.33) and the 100 DMA. A rally above the 200 DMA could see resistance tested at 143.50 and then 144.25. A break down from the 100 DMA could see price run down to the 138.95 support level. The November 22 low at 138.275 is next. The Feeder Cattle Index was lower and is at 144.53 as of 12/4/2019.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursday, December 12that 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.