Livestock Futures Traders Digesting China Response To Iran Tensions

January 7, 2020 08:20 AM
Meats Market Update


Livestock Futures Commentary

Live Cattle (February)

The market retreated on Friday as a risk-off atmosphere evolved, following an increase in tensions between the US and Iran. This prompted some questions regarding the possible spillover effect on the trade negotiations with China. Market participants had the weekend to digest the information and the market recovered those losses today, taking us right back to the December 27th highs. The resistance pocket we laid out last week remains intact from 127.225-127.90. This pocket represents the top end of the two-month range, including the contract highs from December 13th, 127.90. Today’s trade was undoubtedly a feather in the hat for the bull-camp, but the trend is still sideways. New spec shorts should tread lightly, but we are working with clients who need to hedge. Cash cattle came in at 124 in the South last week and 124-125 in the north. Dressed sales came in from 198-200, 2 higher from the previous week.

Resistance: 127.225-127.90***

Support: 124.55-125.10***, 123.125-123.85****

Feeder Cattle (January)

Feeder cattle rallied hard today, posting the highest close since December 13th. Our 4-star support pocket held on a closing basis last week, we defined that as 142.85-143.125. The inability to breakdown below with conviction invited buyers into the market today, sparking a surge towards our 4-star resistance pocket, 146.85-147.975. This is a wider pocket than we would like but it holds a lot of significance, including a key Fibonacci retracement and the recent highs. Consecutive closes above here would resume the uptrend and could eventually take us to retest the April highs.

Resistance: 146.85-147.975****

Support: 142.85-143.125****, 141.55-141.775**

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Lean Hogs (February)

February lean hogs crashed on Friday, closing limit down. Much of this was on fears that increased tensions with Iran could throw a wrench in negotiating trade with China. Perhaps there is a possibility that it could happen, but it is far from a probability. Soybeans also sold off but that’s more reasonable considering they rallied 75 cents in December. The limit down move Friday and follow through seemed to be overkill in our minds and presents an opportunity to look back to the long side. The past two sessions did do some technical damage, the bulls need to achieve consecutive closes back above 70-70.50 to keep the momentum in the bulls’ favor.

Resistance: 70.00-70.50***, 72.075**, 73.95-74.35****

Support: 69.325-70.05****, 65.40-66.50****, 63.675**

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