Livestock Analysis -- Advice (VIP) -- February 20, 2013

February 20, 2013 08:25 AM
 

ADVICE: TAKE PROFITS ON 1ST-QTR. FEED COVERAGE

Livestock producers were advised in the Noon Market Snapshot to take profits on the 25% 1st-qtr. feed coverage in March corn and March soybean meal futures. With March corn and soybean meal futures entering the delivery process next Monday, it was time to exit the 1st-qtr. coverage. Profits totaled $37.40 for the meal coverage and 10 cents for the corn coverage.
 

Hogs

Price action: April and May lean hog futures closed 10 and 37 1/2 cents lower, respectively. The other contracts ended 37 1/2 to 70 cents higher.

Fundamental analysis: News China will require certification U.S. pork shipments are ractopamine-free beginning March 1 had a limited impact today, suggesting this may have already been "in" the market yesterday. While this adds to demand concerns, it seems unlikely China will significantly slow U.S. pork imports for any lengthy period when one of their primary focuses is on controlling food price inflation. This likely contributed to some of the short-covering in deferred lean hog futures today.

Cash hog bids were steady to $1 lower on limited packer demand. With a heavy winter storm likely to impact hog movement, especially in western locations, the remainder of the week, packers will remain focused on trying to improve cutting margins.

Technical analysis: April lean hog futures are heavily oversold at 15.37% according to the 9-day Relative Strength Index. That signals a time or price correction is overdue and should limit near-term selling pressure.

Hedgers: Carry all risk in the cash market for now.

Feed needs: NEW ADVICE: Claim profits on the 25% 1st-qtr. feed coverage in March corn and March soybean meal futures. Our exits yielded profits of $37.40 for the meal coverage and 10 cents for the corn coverage. Maintain the 25% 2nd-qtr. corn coverage in long July corn futures at $6.78 3/4 and the 25% coverage 2nd-qtr. protein coverage in long July soybean meal futures at $388.00.

 

 

Live cattle

Price action: Live cattle futures ended $1.00 to $1.35 lower, though off session lows.

Fundamental analysis: Futures were again pressured by concerns about beef demand, as traders fear recent trade developments could temper export demand. Meanwhile, traders the boxed beef market is signaling a short-term low may be in place or at least close.

Cash cattle trade got underway today in Texas and Oklahoma at $123, which is steady with week-ago. Only light sales have been reported, but this is expected to set the trend for the week. Futures have not been able to garner support from the winter storm that started in the Plains today, as focus is on beef demand concerns.

Technical analysis: April live cattle futures briefly penetrated support at last week's low of $127.62 1/2 before moving off the daily low. Futures still posted a sharp downside day of trade on the daily chart and have a lot of work ahead in order to signal a near-term low has been posted. Contract-low support lies at $125.90.

 

Feeder cattle

Price action: Feeder cattle futures traded limit lower at times today and settled $2.45 to $2.62 1/2 lower.

Fundamental analysis: Futures were pressured by selling in live cattle as well as spillover from corn as it firmed this afternoon. Traders remain concerned about calf demand given still-high feed prices and the drought across the Plains, which limits producers' ability to background calves. Cash feeder cattle prices continue to drop.

Technical analysis: March feeder cattle futures gapped lower on the open and extended losses to post a big downside day of trade on the daily chart. Contract-low support lies at $139.50.

Hedgers: Fed cattle producers should carry all risk in the cash market for now. Feeder cattle sellers and buyers should also carry all risk in the cash market for now, but feeder cattle buyers should stay in touch to establish long coverage.

Feed needs: NEW ADVICE: Claim profits on the 25% 1st-qtr. Feed coverage in March corn and March soybean meal futures. Our exits yielded profits of $37.40 for the meal coverage and 10 cents for the corn coverage. Maintain the 25% 2nd-qtr. corn coverage in long July corn futures at $6.78 3/4 and the 25% coverage 2nd-qtr. protein coverage in long July soybean meal futures at $388.00.

 

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