Livestock Analysis (VIP) -- April 1, 2013

April 1, 2013 09:38 AM
 

Hogs

Price action: Lean hog futures faced pressure in early trade, but the market improved as the day progressed to finish 17 1/2 to 70 cents higher in the April through August contracts. Farther deferred months posted slight losses.

Fundamental analysis: Thursday's mildly bearish Hogs & Pigs Report weighed on the hog market early in today's session. But futures received a boost from unexpected strength in the cash hog market as some plants are still in need of supplies for late-week kills. Traders are also optimistic there will be an uptick in retailer pork buying in preparation for spring grilling.

But considering the product market's struggle to put in a low and negative packer profit margins, upside potential will likely remain limited to short-covering until there are definitive signs a seasonal low is in place. The pork cutout price has gained the past two days, but movement has been inconsistent.

Technical analysis: April lean hogs continued the uptrend from the mid-March low today, trading through and settling above psychological resistance at $81.00. Bulls' next target is the March high of $82.25. Near-term support is the psychological $80.00 mark.

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

Feed needs: Profits have been claimed on 1st-qtr. feed coverage that was held in March corn and meal futures. 25% of 2nd-qtr. corn needs are covered in long July corn futures at $6.78 3/4 and 25% of 2nd-qtr. protein needs are covered in long July soymeal futures at $388.00.

 

 

Live cattle

Price action: Live cattle futures finished 15 to 47 1/2 cents lower in all but some of the far-deferred contracts, which were slightly higher.

Fundamental analysis: Live cattle futures were unable to build on last Thursday's strong gains. Instead, mild profit-taking was seen as demand concerns continue to hang over the market. Until those demand concerns are eased, traders will remain reluctant to actively pump money into the long side of the market.

Boxed beef prices were mixed this morning (Choice boxes higher, Select lower), but movement was light at just 86 loads. Packers will be reluctant to raise cash cattle bids after paying as much as $4 higher for supplies last week unless the boxed beef market strengthens.

Technical analysis: Key resistance for June live cattle futures stands at the 38% retracement of the price plunge from the December high to the March low around $125.19. A close above that level would signal an extended correction is underway.

 

Feeder cattle

Price action: Feeder cattle futures closed with gains of $1.97 1/2 to $2.60 and on or near session highs today.

Fundamental analysis: Heavy followthrough selling in the corn market triggered another day of strong gains in feeder cattle -- the market's third consecutive day of strong gains. A lack of buying interest in live cattle did little to deter buying interest in feeders.

Technical analysis: May feeder cattle futures have retraced more than 38% of the price plunge from the January high to the March low. A 50% retracement lines up closely with old key support at the January low of $149.45, marking that area as key resistance.

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: Profits have been claimed on 1st-qtr. feed coverage that was held in March corn and meal futures. 25% of 2nd-qtr. corn needs are covered in long July corn futures at $6.78 3/4 and 25% of 2nd-qtr. protein needs are covered in long July soymeal futures at $388.00.

 

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