Livestock Analysis (VIP) -- August 14, 2012

August 14, 2012 09:33 AM


Price action: August lean hogs expired 15 cents lower at $91.80 today. The new front-month October contract closed 37 1/2 cents higher while the December through April contracts ended 12 1/2 to 60 cents lower. This was a high-range close for most contracts.

Fundamental analysis: While the October contract benefited from the steep discount it holds to the cash index, other contracts faced profit-taking pressure amid ongoing weakness in the cash market. Cash hog bids were steady to as much as $2 weaker today as supplies are ample and yesterday's decline in the pork cutout value gave packers little incentive to raise bids.

Technical analysis: October lean hog futures remain in their recent uptrend with bulls' near-term target at former support at the May low of $78.55, followed by the June low of $79.30. The double-bottom contract low at $74.90 is strong support.

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

Feed needs: Risk is covered in the cash market for now.



Live cattle

Price action: Live cattle futures ended steady to 52 1/2 cents higher, which was good for a mid- to high-range close.

Fundamental analysis: Ongoing strength in the beef market has traders looking for $1 to $2 higher cash cattle prices again this week. Last week cash traded very late in the week at $119 to $120. Choice beef values rose $2.32 this morning and Select was up $2.34, but movement has slowed, with only 98 loads changing hands. August live cattle are trading in line with the upper range of cash expectations.

Technical analysis: October live cattle gapped higher on the open, set back to briefly move below yesterday's low before returning to near opening levels to post a bullish reversal. Closes above the May high of $127.05 would strongly suggest a near-term low has been posted.

Feeder cattle

Price action: Feeder cattle futures closed $1.32 1/2 to $2.32 1/2 higher, supported by weakness in the corn market.

Fundamental analysis: Feeder cattle futures strengthened as corn futures softened because traders continue to watch the feed market for signals regarding calf demand. Traders are anticipating stronger demand in the near-term, as August feeder futures are trading at around a $5 premium to the cash index.

Technical analysis: October feeder cattle futures gapped higher on the open, softened, but left a gap open and finished near opening levels. Filling the July 11-12 gap area at $147.50 is needed to signal a near-term low has been posted.

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.

Feed needs: Risk is covered in the cash market for now.


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