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Livestock Analysis (VIP) -- April 15, 2014

15:17PM Apr 15, 2014



Price action: Lean hog futures closed mixed today with nearby futures 12 1/2 to 17 1/2 cents weaker, the July and August contracts 35 to 47 1/2 cents higher and October and December contracts down 95 cents to $1.15.

Fundamental analysis: Short-covering continued today as traders read signs last week's selloff was overdone. But the near-term fundamentals remain negative. Cash hog prices traded lower today and wholesale prices skidded lower. Packers continue to cut in the black and traders expect them to become more aggressive at the end of this holiday-shortened week to line up supplies for next week.

The pork cutout value fell $1.25 this morning but movement improved to 161.21 loads. USDA estimates today's slaughter at 415,000 head, which is down slightly from last week's 416,000 and down from last year's 422,000 head.

Technical analysis: June lean hogs closed about midrange but on the negative side of yesterday's close. Futures surged early on short covering but encountered resistance around $124.75. The six-day uptrend line offers support at $120.60 tomorrow.

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 faced pressure today and ended 7 1/2 to 75 cents lower on the day. This was a high-range close for the front-month but a mid- to low-range close for deferred contracts.

Fundamental analysis: Traders in the live cattle market took advantage of recent gains by booking some profits today. Also, early expectations for steady to lower cash cattle trade weighed on futures. However, the front-month is around $2 below the low-end of last week's cash trade, which should limit additional downside risk for the market over the near-term.

Also helping to limit pressure was recent improvement in boxed beef movement and prices. This morning, Choice and Select values firmed 95 cents and $2.03, respectively, and movement was decent at 88 loads.

Technical analysis: June live cattle tested but finished well above recent uptrending support drawn off the lows this month. The trendline intersects around $135.30 tomorrow. Below that, support is at the January spike high of $134.72 1/2. Friday's high of $136.35 is resistance.


Feeder cattle

Price action: Feeder cattle futures ended 15 cents to 77 1/2 cents lower on the day, with nearbys leading to the downside.

Fundamental analysis: Profit-taking after yesterday's rally to new contract highs for nearbys weighed on feeder cattle futures. A mildly higher U.S. dollar index and a late rebound in corn added pressure.

Technical analysis: May feeder cattle futures posted losses for the day, but the market's uptrend remains intact and the contract is less than $1 off contract-high resistance at $180.60. The contract tested but respected support drawn off the lows since February. This uptrending line intersects around $179.31 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.