Livestock Analysis -- July 23,2012

July 23, 2012 09:50 AM
 

Hogs

Price action: Lean hog futures faced pressure throughout the session and ended low-range with losses of 15 to 97 1/2 cents.

Fundamental analysis: Lean hog futures were unable to shake the pressure of negative outside markets on a renewal of fears about Spanish debt troubles. Such concerns have again sparked worries about pork demand overseas in the face of a weakening global economy.

Performance in the pork cutout market must impress to give traders confidence in the long side of the market. Packers remain reluctant to raise cash hog bids as they continue to cut in the red, but tightening supplies have nevertheless caused some to do so. If pork prices do not pull margins into the black soon, plants may again reduce kill hours.

Technical analysis: August lean hogs finished low-range, but did no chart damage. Initial resistance is at Friday's high of $94.25 while near-term support lies at the bottom of Thursday's upside gap at $92.80.

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

Feed needs: Risk is covered in the cash market for now.

 

 

Live cattle

Price action: Live cattle futures maintained gains through the close and finished 20 to 65 cents higher, which was mid- to high-range for the day.

Fundamental analysis: Live cattle futures opened lower on pressure from outside markets, but worked higher as traders factored in last Friday's USDA report data. The Cattle on Feed Report was in line with pre-report guesses, while the Cattle Inventory Report showed cattle supplies will remain tight well into the future as the industry works out of a major contraction cycle. But the premium futures hold to the cash market and negative outside markets limited buying interest in live cattle futures.

Additional support came from the boxed beef market. While prices were mildly weaker this morning, movement was strong. That's the first hint the product market may be nearing a short-term low, which is needed before packers raise cash cattle bids.

Technical analysis: Initial resistance for August live cattle lies at last week's high of $119.10. Above that level, resistance is layered from the June 29 high of $120.55 to the May high at $122.40. Support is layered from last week's low at $115.45 to the April low at $114.70.

 

Feeder cattle

Price action: Feeder cattle futures closed 30 to 80 cents lower, which was low-range.

Fundamental analysis: Feeder cattle futures were unable to sustain early corrective gains despite weakness in corn prices. That's a clear indication traders fear the corn market has not yet put in a top. They will be reluctant to buy until there's a clear sign of a major top.

Technical analysis: Last week's low and high at $133.10 and $139.15, respectively, stand as near-term support and resistance for August feeder cattle futures.

 

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.

Feed needs: Risk is covered in the cash market for now.

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