Livestock Analysis (VIP) -- August 20, 2012

August 20, 2012 10:00 AM
 

Live cattle

Price action: Live cattle futures ended at or near their daily highs with gains of 20 to 75 cents.

Fundamental analysis: Cattle futures favored the upside as they traded in a narrow trading range today. Futures were already in line with last week's firmer cash cattle prices, so attention shifted to initial cash cattle trade indicators this week. While Choice and Select boxed beef cuts continued their impressive rally today, movement slowed notably, which signals the market is likely working on a top. But downside risk is limited as supplies are expected to tighten through year-end. Plus, this week's tighter showlist estimates in Kansas and Nebraska outweigh a heavier count in Nebraska and signal higher cash prices may again be possible this week.

Technical analysis: October live cattle futures posted an inside day of trade, leaving near-term resistance at last week's high of $127.22 1/2 and support at the August low of $123.60.



Feeder cattle

Price action: Feeder cattle futures settled with gains of 12 1/2 to 60 cents, which was at or near their daily highs.

Fundamental analysis: Feeder cattle futures benefited from light short-covering on ideas the downside has been overdone recently and the tightening supply situation USDA's Cattle on Feed Report pointed to on Friday. However, this will be the extent of buying interest until the corn market softens, as high feed costs continue to limit demand for feeder cattle.

Technical analysis: September feeder cattle futures bounced off support around the psychological $142.00 level today, marking it as near-term support. Bulls' initial target is last week's high of $145.12 1/2.

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.



Hogs

Price action: Lean hog futures got off to a firmer start, but selling picked up into the close and futures ended low-range and narrowly mixed, with nearbys favoring the downside.

Fundamental analysis: Lean hog futures initially benefited from some short-covering on ideas the downside has been overdone and the discount futures hold to the cash hog index. But cooler temps have led to supply expansion, which encouraged some late profit-taking. The cash hog market was mixed today as increased slaughter schedules are helping to keep supplies from becoming burdensome.

Technical analysis: October lean hog futures settled low range which will give bears the upper hand to start the next session. Strong, near-term support is the double-bottom low of $74.90. Resistance stands at last week's high of $77.70.

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

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

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