Livestock Analysis (VIP) -- Advice -- February 13, 2014

February 13, 2014 09:06 AM
 

Hogs

Advice: Livestock producers are advised to claim profits on the 25% 1st-qtr. protein coverage in long March soybean meal futures. Our exit was $451.40 for a profit of $40.60.

Price action: February lean hog futures ended 15 cents weaker ahead of tomorrow's expiration, while the rest of the market closed 22 1/2 to 55 cents higher.

Fundamental outlook: Lean hog futures enjoyed spillover from sharp gains in nearby live cattle futures, with additional support coming from bullish technicals and concerns about tightening supplies. Winter weather moving across the eastern U.S. also limited marketings today, which was supportive for the cash hog market.

Early expectations are for steady to firmer cash hog bids again tomorrow as packers are dealing with profitable margins, which gives them incentive to keep kill lines running as full as possible.

Technical outlook: April lean hog futures traded above last week's high to put the contract high of $96.45 within bulls' reach. The contract came off session highs into the close to finish mid-range. The uptrend remains well intact and today's higher high is a sign the upside has not yet been exhausted. Support extends from yesterday's low of $93.70 to the February low of $92.80.

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

Feed needs: NEW ADVICE: Claim profits on the 25% 1st-qtr. protein coverage in long March meal futures. Our exit was $451.40 for a profit of $40.60.

 

Live cattle

Advice: Livestock producers are advised to claim profits on the 25% 1st-qtr. protein coverage in long March soybean meal futures. Our exit was $451.40 for a profit of $40.60.

Price action: Live cattle futures enjoyed strong gains today and ended 80 cents to $1.62 1/2 higher for the day, which was a high-range close.

Fundamental outlook: The cattle market surged today on technical buying after nearby contracts hit a new weekly high. Sharp weakness in the U.S. dollar index gave the market additional incentive to favor the long side of the market. Fundamentally speaking, traders were encouraged by much-improved beef movement yesterday and this morning, which signals prices are seen as a value. While prices continue to soften, the pace of declines has moderated, also indicating a low may be near.

Some light cash cattle trade got started in Kansas today at $142, which is up $1 from the bulk of last week's limited trade and down $3 from active trade in the region two weeks ago.

Technical outlook: April live cattle surged through and closed above resistance at yesterday's high of $141.80 and $142.00, turning these levels into support. The contract appears headed for a test of the contract high of $143.20.

 

Feeder cattle

Price action: Feeder cattle futures gapped higher on the open and ended just off session highs with gains of $1.42 1/2 to $2.22 1/2, with nearbys leading to the upside.

Fundamental outlook: Sharp weakness in the U.S. dollar index and a downside bias in the corn market gave bulls the advantage on the open. Spillover from live cattle added to the positive tone. Nearby contract's gap through the psychologically significant $170.00 level added technical support. The front-month is now at around a $1 premium to the cash index.

Technical outlook: March feeder cattle futures gapped higher on the open and extended gains throughout the day, ultimately hitting a new contract high and settling just off that level. Turning to the weekly continuation chart, bulls' next target is the all-time of high of $171.42 1/2. But recent volatile action means a downside correction could be near.

Hedgers: Fed cattle producers are long April $136.00 put options at $1.325 covering remaining 1st-qtr. and 50% of 2nd-qtr. marketings and are short the same number of April $144.00 call options at $1.525.

Feed needs: NEW ADVICE: Claim profits on the 25% 1st-qtr. protein coverage in long March meal futures. Our exit was $451.40 for a profit of $40.60.

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