Livestock Analysis (VIP) -- April 14, 2014

April 14, 2014 09:47 AM
 

Hogs

Price action: April lean hog futures expired 12 1/2 cents lower at $124.80 today. The rest of the market closed 35 cents to $1.95 higher for the day, with summer month contracts leading gains.

Fundamental analysis: Recent short-covering following a decline since the start of the month indicates traders view the selloff as overdone. Adding to such ideas, the new front-month May contract is more than $5 below the cash hog index as losses in futures outpaced those of the cash market. But cash hog bids were again steady to lower today as packers are readying for a holiday-shortened kill schedule and some are bought ahead on near-term needs.

Meanwhile, the pork cutout value firmed 39 cents today, though movement slowed. Traders remain on watch for signs prices have reached levels that spur strong demand.

Technical analysis: June lean hogs finished high range and just off near-term resistance at $123, which coincides with late-March low. On the other hand, last week's plunge to $115.92 1/2 marks tough support. But before that, the $120.00 area has acted as an area of support.

Hedgers: 50% of expected 2nd-qtr. hog marketings and 50% of expected 3rd-qtr. Hog marketing are covered in $126.00 June lean hog put options for $3.90.

Feed needs: Carry all corn-for-feed and meal risk in the cash market for now.

 

Live cattle

Price action: Live cattle futures closed 2 1/2 cents lower to 50 cents higher in the 2014 contracts with the lead-month April contract leading today's modest gains in most contracts.

Fundamental analysis: Cattle futures traded in a very narrow range today. Traders have a bearish outlook on cash prices but April futures are already trading at nearly a $2 discount versus the $147 cash trade price posted in the Southern Plains last week. The June contract carries an $11 discount. Packer cutting margins continue to worsen, which is likely to make them reluctant buyers this week.

The wholesale beef market offered mixed news this morning as Choice boxed beef firmed 66 cents but Select beef slipped 74 cents. However, movement was an encouraging 117 loads. Slaughter today is estimated at 110,000 head, down from last week's 115,000 head and last year's 121,000 head.

Technical analysis: June cattle futures posted an inside day on the daily chart. The six-day upswing since the April 4 collapse could be forming a bearish flag formation, which would be confirmed with a close under $135.17. However, there is long-term uptrending support at $134.67 with additional support at $134.30 marked April 7. Resistance exists at the $136.40 area, which also coincides with the 14-day Moving Average.

 

Feeder cattle

Price action: Feeder cattle futures closed slightly higher, ranging from 30 cents to 50 cents higher in the April through October contracts with April leading gains.

Fundamental analysis: Feeder cattle futures edged higher on their continuing positive chart formation. The slightly higher live cattle futures offered additional support. Long-term fundamentals favor continuing tight supplies going forward. But buying interest was limited by strength in the corn market today.

Technical analysis: May feeder cattle futures closed near their contract highs, which is the last area of upside resistance. Meanwhile, the contract continues to find support from the rising 14-day Moving Average and the winter uptrend line. That uptrend line offers support at about $178.51 tomorrow.

Hedgers: Fed cattle producers have 50% of 2nd-qtr. marketings hedged in April live cattle futures at $144.20.

Feed needs: Carry all corn-for-feed and meal risk in the cash market for now, but be prepared to extend coverage on a price break.

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