Livestock Analysis (VIP) -- April 16, 2014

02:41PM Apr 16, 2014
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Price action: Lean hog futures faced pressure this morning, but the market later reversed course and strengthened into the close. Futures settled $1.25 to $1.67 1/2 higher through the August contract, while deferred months were mixed.

Fundamental analysis: Lean hog futures opened under pressure, but this gave way to bargain buying and futures ended high-range with strong gains for the day. This adds to ideas a short-term low is in place for the market. Gains in the live cattle market added spillover support.

Propelling buying interest was marked improvement in the product market today, an early sign prices may be approaching value levels. The pork cutout value surged $2.38 this morning and, even more impressive, movement jumped to 320.07 loads. This was just shy of yesterday's total load movement and above the overall load count Thursday through Monday.

Technical analysis: June lean hogs uncovered buying interest around yesterday's low of $121.20, marking this as near-term support. Below this, support stands at $120.00, followed by last week's spike low to $115.92 1/2. Resistance stands at $125.00.

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 ended 12 1/2 to 47 1/2 cents higher through the December contract amid light short-covering.

Fundamental analysis: Futures were choppy today, but the market was generally supported by ideas yesterday's losses were overdone. Additional support came from ideas the boxed beef market has found value. Choice values firmed another 30 cents this morning on strong morning movement. But with packers' profit margins still deep in the red and available marketings up slightly from last week, traders still expect $1 to $2 lower cash cattle trade compared with last week's $147 trade. Cash trade should begin tomorrow given that many packers are closed on Friday and Saturday ahead of Easter.

Technical analysis: June live cattle posted an inside day up on the daily chart. The high-range close bodes well for market bulls heading into overnight electronic trade Importantly, the contract respected uptrending support drawn off April reaction lows.

Feeder cattle

Price action: Feeder cattle futures saw choppy trade today, but rallied into the close to finish 2 1/2 to 40 cents higher on light spillover from live cattle.

Fundamental analysis: A weaker tone in the corn market and a firmer tone in live cattle contributed to slight gains in feeder futures today. April and May feeders are trading in line with the cash index.

Technical analysis: May feeder cattle futures posted an inside day up on the daily chart. Futures remain within the boundaries of the long-lasting uptrend. Support is currently near $179.00 and contract-high resistance is at $180.60.

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.