Livestock Analysis (VIP) -- September 19, 2013

September 19, 2013 09:53 AM


Price action: Lean hog futures were mixed today, with the October through April contracts ending 32 1/2 to 65 cents lower, while deferred futures were steady to 10 cents higher.

Fundamental outlook: Nearby futures were vulnerable to profit-taking following yesterday's gains, but pressure was limited by tighter-than-expected supplies and strong pork movement. Meanwhile, the cash market was mixed amid variable demand. Some locations were willing to bid $1 higher for hogs as they worked to secure this week's needs, while others worked to improve margins.

There is still upside potential for nearby futures based on the discount those contracts hold to the cash index, which is projected at $97.46. October hogs ended the day at a $6.31 discount to the index.

Technical outlook: December lean hog futures posted an inside day down on the daily chart to remain in the boundaries of the two-week choppy trading range. Increased price volatility at high prices often suggests the market is in the process of putting in a high.

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

Feed needs: 25% of 4th-qtr. protein needs are covered in long Dec. meal futures at $422.20 and 25% of 1st-qtr. needs are covered in long March meal futures at $410.80.


Live cattle

Price action: Live cattle futures gapped higher on the open and the market ultimately settled high-range with gains of 40 to 77 1/2 cents for most contracts.

Fundamental outlook: Traders favored the upside as they readied positions for the start of cash cattle trade and Friday's Cattle on Feed Report. The monthly update on U.S. cattle inventory is expected to show all categories well below year-ago, with Placements being the wildcard with a 15.4-point range on the pre-report trade guess.

Improvement in boxed beef movement this week and the seasonal tendency for an uptick in demand this time of the year is giving traders a favorable outlook toward this week's cash prospects. Beef export demand has also been strong of late. Showlist estimates are sharply higher in Nebraska this week, but slightly lower on the Southern Plains and Colorado.

Technical outlook: October live cattle futures gapped higher on the open and posted a mild upside day of trade. Bulls' next upside target is the July high of $126.95. Support is layered from the September low of $124.30 to the the August low of $124.12 1/2.


Feeder cattle

Price action: Feeder cattle futures gapped sharply higher on the open and the market ended 57 1/2 cents to $1.07 1/2 higher in all but the front-month, which closed steady for the day.

Fundamental outlook: Buying interest in the front-month was limited by the premium it holds to the cash index, but the rest of the market was lifted by expectations Friday's Cattle on Feed Report will confirm tightening calf supplies. Spillover from the live cattle market added support.

Technical outlook: October feeder cattle futures are nearing key psychological resistance at $160.00, which coincides with this month's high. Penetration of this level would set the contract up for a test of the August high at $160.70. Tough support is at the August low of $155.85.

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: 25% of 4th-qtr. protein needs are covered in long Dec. meal futures at $422.20 and 25% of 1st-qtr. needs are covered in long March meal futures at $410.80.

Back to news


Spell Check

No comments have been posted to this News Article

Corn College TV Education Series


Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!


Market Data provided by
Brought to you by Beyer