Livestock Analysis (VIP) -- April 21, 2014

02:39PM Apr 21, 2014
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Price action: Lean hog futures closed sharply lower in the May through August contracts with the October and December contracts closing 70 to 75 cents lower.

Fundamental analysis: Profit-taking continued to dominate hog futures as traders believe hogs have marked a major top. The wholesale pork market provided some positive news with the morning trade coming in 57 cents higher on the pork cutout. But once again, movement was relatively slow at 109.75 loads. Hence the trader concern and reason for taking profits.

Slaughter was a light 273,000 head as plants geared up after the Easter weekend. Today's slaughter compares to 377,000 a week ago and 409,000 head a year ago. With packer profit margins again in the black, packers could be a little more aggressive in bidding for supplies this week.

Technical analysis: June futures continue to trend higher in a rising channel since the posting of an upside key reversal April 9. Futures closed on the bottom of that channel today. Technical traders worry a close under this rising channel line would mean a test of the April 9 low at $115.92 1/2. Resistance sits at Thursday's high of $125.50. The next upside target it the gap area at $128.85 to $129.35.

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 for most of the day, but the market firmed late in today's session to finish steady to slightly higher in most contracts. An exception was the front-month, which ended ended down 75 cents.

Fundamental analysis: Live cattle futures faced pressure for most of the session due to $1 to $2 lower cash cattle trade at $146 in the Southern Plains and at $148 in Nebraska on Friday. But this eventually faded as traders recognize futures are already $2 or more below the cash market. The market also benefited from bargain buying on nearby contracts' dip through monthly support.

The market also got a lift from strong gains in the beef market today, which reminded the product market has found value. This morning, Choice boxed beef values jumped $1.69 and Select rose $1.87. Movement was decent at 95 loads.

Technical analysis: June live cattle found bargain buying on the test of $134.00 today, marking this level as support, along with the early April lows around $134.35. Near-term resistance is at the April 11 high of $136.35.


Feeder cattle

Price action: Feeder cattle futures saw mixed trade today, but bulls had control of the market at the close. Futures ended 5 to 72 1/2 cents higher for the day.

Fundamental analysis: Losses in the corn market and the slight discount the front-month holds the cash index lifted feeder cattle futures today. A late rebound in live cattle added support.

Technical analysis: May feeder cattle futures dipped below last week's low of $178.00 today, but this triggered bargain buying, marking that as a level of near-term support. After that, support is layered from the April 1 low of $176.37 1/2 to the March 21 low of $175.70. Tough resistance remains at the double-top contract high of $180.60

Hedgers: Fed cattle producers have 50% of 2nd-qtr. marketings hedged in April live cattle futures at $144.20. Stay in touch to exit or roll ahead of contract expiration on April 30.

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.