Livestock Analysis (VIP) -- April 3, 2014

April 3, 2014 10:30 AM


Price action: Lean hog futures traded sharply lower throughout the day but trimmed losses near the close to finish $1.15 to $2.25 lower in the April through August contracts. October hogs closed 63 cents lower while December futures closed 10 cents higher.

Fundamental analysis: Heavy selling swamped the front-month contracts as traders pocketed profits on ideas a top may have been posted in hog futures. Adding to the negative tone today was the $1.78 decline in the pork cutout value this morning. In addition, the lower price came on lackluster movement of only 165.21 loads. Selling in the April contract was limited by its already steep discount to the cash hog index.

The cash hog market was steady today despite reduced kill schedules from some plants. Slaughter today was 409,000 head compared to 407,000 last week and 427,000 a year ago.

Technical analysis: June lean hogs easily penetrated support at the March low of $123.00, but profit-taking trimmed losses and the contract finished mid-range. The $130 mark is now resistance. The parabolic rise posted by hog futures this winter leaves very few obvious support zones in place. The first is psychological support at $120.00

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 enjoyed mild gains throughout today's session and most contracts ended mid- to high-range. The market settled 27 1/2 to 65 cents higher on the day.

Fundamental analysis: Nearby live cattle futures benefited from efforts to narrow the gap these contracts hold to last week's cash cattle trade that ranged from $150 to $154. While steady to lower cash cattle trade is expected, sharply lower trade is not likely in the cards, especially considering beef prices that are not too far off record-highs. Feedlots are passing on bids around $147 in Kansas.

The market was also encouraged by much-improved beef movement on a moderate decline in boxed beef prices. A surge in feeder cattle futures added spillover support, too.

Technical analysis: June feeder cattle futures settled high-range, setting the stage for a test of psychological resistance at $138.00, which stymied buying in early March. Tough resistance stands at the contract high of $139.00.


Feeder cattle

Price action: Feeder cattle futures enjoyed strong gains throughout the session with many contracts notching new contract highs. The market settled $1.60 to $2.25 higher for the day, with the August contract leading gains.

Fundamental analysis: Technical buying propelled a number of contracts today. The May contract surged through psychological resistance at $180.00 to hit a new contract high. Deferred months saw similar trade and turned the $181.00 mark into support. The front-month's gains were more modest (though still strong), but the contract still ended the day at around a $1 premium to the cash index.

Technical analysis: Today's surge in May feeder cattle turned the former contract high of $180.35 into initial support. This leaves just psychological levels as resistance, starting at $181.00.

Hedgers: Fed cattle producers are long April $136.00 put options at $1.325 covering 1st-qtr. and 50% of 2nd-qtr. marketings. The April $144.00 call options that we sold for $1.525 were exercised into a short futures position, meaning we are effectively hedged at $144.20 (the strike price plus the 20 cents we made on the initial sale of these calls compared to what we spent on the puts).

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.

Back to news


Spell Check

No comments have been posted to this News Article

Corn College TV Education Series


Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!


Market Data provided by
Brought to you by Beyer