Livestock Analysis (VIP) -- April 8, 2013

April 8, 2013 07:00 AM
 

 

Hogs

Price action: Lean hog futures settled 40 cents to $1.17 1/2 cents higher today. For some contracts, this was near session lows; for other contracts this was a high-range finish.

Fundamental analysis: Lean hog futures benefited from corrective short-covering today amid ideas the downside was overdone last Friday in reaction to the disappointing non-farm payrolls report. While the report does raise questions about how the meat markets will fare as consumers look to cut costs, this situation could also encourage them to favor cheaper pork over beef.

But this has yet to be reflected by the product market, thus limiting buying interest to short-covering. Recent pork market weakness has also pulled packer profit margins solidly into the red, which could encourage some plants to scale back kill hours. Today packers paid steady to higher prices for tightening market-ready supplies.

Technical analysis: June lean hogs traded through and settled above the psychological $90.00 level today, setting the contract up for a test of the top of last week's downside gap at $91.30. Support is at Friday's low of $89.55.

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

Feed needs: All feed coverage has been lifted. Carry all risk in the cash market for now.

 

 

Live cattle

Price action: Live cattle futures closed 25 to 52 1/2 cents higher in the 2013 contracts, with 2014 contracts down 2 1/2 to 25 cents.

Fundamental analysis: Nearby futures were supported by ideas last week's losses were overdone, with traders reevaluating positions and keeping a close watch on demand. But if the boxed beef market is disappointing to start the week, selling in futures will return as traders remain concerned about demand.

This week's cattle showlist is down in Nebraska, Colorado and Texas and up just marginally in Kansas. Smaller showlists give feedlots more bargaining power in this week's cash negotiations and were also viewed as supportive today.

Technical analysis: April live cattle recovered after violating support at last week's low to finish mid-range, but the contract has a lot of work to do to signal the market has posted a near-term low. Contract-low support is at $124.75, with resistance at last week's high of $129.05.


Feeder
cattle

Price action: Feeder cattle futures benefited from spillover from live cattle to close 17 1/2 to 77 1/2 cents higher.

Fundamental analysis: Much of today's support came from short-covering on ideas last week's losses were overdone due to tightening calf supplies. A softening of new-crop corn futures was also viewed as supportive as market bulls hope a larger 2013 corn crop will improve demand for cattle placements.

Technical analysis: May feeder cattle futures posted an inside day of trade on the daily chart. Near-term boundaries are support at the bottom of the late-March gap at $142.15 and resistance at last week's high of $147.70.

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: All feed coverage has been lifted. Carry all risk in the cash market for now.

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