Livestock Analysis -- (VIP) -- July 3, 2013

July 3, 2013 09:07 AM
 

Hogs

Price action: Lean hog futures saw a choppy day of trade, with nearbys favoring the upside.

Fundamental analysis: Mixed fundamentals led to light, choppy trade in the lean hog market ahead of the July Fourth holiday. Cash hog bids were mostly steady today as supplies are tight and packers are buying supplies for the first half of next week. Impressive is the fact that just limited profit-taking was seen after a $5.69 plunge in the pork cutout value this morning (largely due to a $17.37 drop in bellies). The silver lining is that movement picked up notably on the price break.

If the turnaround in bellies continues to pull the pork cutout value down in the days ahead, it could cause the cash market to soften to bring it in line with futures.

Technical analysis: Near-term support for August lean hogs is yesterday's low of $95.95, followed by the 38% retracement of the March to June rally at roughly $95.14. Near-term resistance is at the June 10 high of $97.80, which roughly coincides with the January high.

Hedgers: 50% of expected 3rd-qtr. production is hedged in Aug. lean hog futures at an average price of $97.67 1/2 and 50% of expected 4th-qtr. production is hedged in Dec. lean hog futures at an average price of $82.12 1/2.

Feed needs: All feed coverage has been lifted. Carry all risk in the cash market for now.

 

Live cattle

Price action: Live cattle futures traded in a very narrow range as position squaring dominated ahead of the holiday Thursday. Futures closed steady to slightly higher with August up 5 cents, closing near the day's lows, and December up 52 1/2 cents, closing near the day's highs.

Fundamental analysis: Futures were on hold for much of the day awaiting direction from the cash market. Around midday, reports emerged that cash traded had started at $119, which is down $1 from the previous week. This puts August futures at a $3 premium to the cash market and vulnerable to profit-taking on Friday.

Choice and Select boxed beef showed gains during the morning trade and movement was relatively moderate. Traders are still waiting on solid signs of a low from the product market.

Technical analysis: August live cattle futures closed on the short-term uptrend line which has held since mid-June. If that uptrend is broken, the next line of support is the $120.00 area down to by contract low at $117.90. The contract has resistance at $124.10.
 

Feeder cattle

Price action: Feeder cattle closed narrowly mixed in very thin per-holiday trade with August futures up 5 cents and the October contract down 7 1/2 cents.

Fundamental analysis: Feeder cattle futures got a slight lift from modestly higher live cattle futures and weaker new-crop corn futures. The August contract is at a $10 premium to the cash index, but the index is trending higher.

Technical analysis: August feeder cattle futures traded in a very narrow range and settled on the short uptrend line which has supported futures since mid-June. There is resistance at the late-April high of $152.17 1/2. Support is layered from just above $147.00 to the contract low at $142.50.

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: All feed coverage has been lifted. Carry all risk in the cash market for now.

Live cattle

Price action: Live cattle futures traded in a very narrow range as position squaring dominated ahead of the holiday Thursday. Futures closed steady to slightly higher with August up 5 cents, closing near the day's lows, and December up 52 1/2 cents, closing near the day's highs.

Fundamental analysis: Futures were on hold for much of the day awaiting direction from the cash market. Around midday, reports emerged that cash traded had started at $119, which is down $1 from the previous week. This puts August futures at a $3 premium to the cash market and vulnerable to profit-taking on Friday.

Choice and Select boxed beef showed gains during the morning trade and movement was relatively moderate. Traders are still waiting on solid signs of a low from the product market.

Technical analysis: August live cattle futures closed on the short-term uptrend line which has held since mid-June. If that uptrend is broken, the next line of support is the $120.00 area down to by contract low at $117.90. The contract has resistance at $124.10.
 

Feeder cattle

Price action: Feeder cattle closed narrowly mixed in very thin per-holiday trade with August futures up 5 cents and the October contract down 7 1/2 cents.

Fundamental analysis: Feeder cattle futures got a slight lift from modestly higher live cattle futures and weaker new-crop corn futures. The August contract is at a $10 premium to the cash index, but the index is trending higher.

Technical analysis: August feeder cattle futures traded in a very narrow range and settled on the short uptrend line which has supported futures since mid-June. There is resistance at the late-April high of $152.17 1/2. Support is layered from just above $147.00 to the contract low at $142.50.

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: All feed coverage has been lifted. Carry all risk in the cash market for now.

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