Crops Analysis (VIP) -- April 7, 2014

April 7, 2014 09:49 AM
 

Hogs

Price action: Lean hog futures saw two-sided trade today, but bulls had the advantage at the close. Futures ended 25 cents to $1.87 1/2 higher on the day, which was generally a high-range close.

Fundamental analysis: A number of contracts gapped lower on the open amid a continuation of last week's steep decline, but this gave way to some bargain buying and futures closed the gap and then some, with most contracts posting solid gains. Adding support was a $1.10 jump in the pork cutout value this morning, possibly signaling the market may have found value levels around the $130.00 per cwt. mark. But movement remained on the light side at 114.18 loads.

Meanwhile, cash hog bids were steady to lower today as some plants have trimmed kill hours in reaction to reduced supplies due to the porcine epidemic diarrhea virus (PEDV); others are well supplied for near-term needs.

Technical analysis: May lean hogs gapped lower on the open, taking out support at the late-March low of $119.45. But the market uncovered buying interest on this dip and settled back above the aforementioned low and the $120.00 level, leaving them as near-term support. Resistance starts at $121.00 and is layered every dollar higher up to tough contract-high resistance at $127.52 1/2.

Hedgers: 50% of expected 2nd-qtr. hog marketings and 50% of expected 3rd-qtr. Hog marketing are covered in $126.00 June lean hog put options for $3.90.

Feed needs: Carry all corn-for-feed and meal risk in the cash market for now.

 

Live cattle

Price action: April live cattle futures finished 2 1/2 cents lower, while deferred contracts ended 12 1/2 to 80 cents higher. Futures closed high-range for the day.

Fundamental analysis: A poor close last Friday along with indications the cash and product market have posted short-term tops weighed on cattle futures at points today. But futures fought back thanks largely to late strength in the hog market. The big discount futures hold to the cash market also was supportive, although not enough to get the lead-month April contract above unchanged.

Cash cattle traded $2 to $4 lower in the Plains last week. But feedlots didn't clean up all of the available supplies, meaning this week's showlist is bigger. Therefore, traders have negative expectations for cash cattle trade this week. Given the big discount futures already hold to the cash market, however, cash weakness is already factored into the market. That should limit pressure on futures this week.

Technical analysis: April live cattle futures are at a key level technically. After posting a triple-top around the contract high, the contract is threatening a downside breakout from the short-term consolidation range. If that breakout is confirmed, it would open downside risk to the February low at $138.60.

 

Feeder cattle

Price action: Feeder cattle futures posted slight gains in all but the April contract, which ended 20 cents lower today.

Fundamental analysis: Feeder cattle traded in-step with live cattle today. Late strength in hogs and a weaker tone in corn through the day session helped support feeders. The strongest source of support for feeders, however, remains tight calf supplies and strong demand despite historically high prices.

Technical analysis: August feeder cattle futures continue to hold in the uptrending channel. Contract-high resistance stands at $181.95, while near-term support is at the March 21 low of $177.07 1/2.

Hedgers: Fed cattle producers have 50% of 2nd-qtr. marketings hedged in April live cattle futures at $144.20.

Feed needs: Carry all corn-for-feed and meal risk in the cash market for now, but be prepared to extend coverage on a price break.

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