Livestock Analysis (VIP) -- August 21, 2012

August 21, 2012 09:49 AM


Live cattle

Price action: Live cattle futures were under pressure most of the session, and selling picked up after midday. Futures finished 7 1/2 cents to $1.70 lower with nearbys leading to the downside.

Fundamental analysis: Live cattle futures saw some light profit-taking early today, which picked up after the release of this morning's boxed beef action. For the first time since early August, Choice and Select values slipped 16 and 5 cents, respectively, though this encouraged improved movement of 89 loads. This adds weight to ideas the boxed beef market is topping.

However, eventual downside risk is limited as cattle supplies are expected to tighten through year-end and beef demand has remained strong.

Technical analysis: October live cattle futures ended just off their session lows, which will give bears the upper hand tomorrow. Their initial target is former resistance at the June 29 high of $124.45. Resistance stands at last week's high of $127.22 1/2.

Feeder cattle

Price action: Feeder cattle futures settled low range with losses of 75 cents to $1.67 1/2.

Fundamental analysis: The corn market's move back toward all time highs weighed heavily on feeder cattle futures today. High feed costs along with deteriorating pasture conditions are tightening the calf supply but also deterring demand for feeder cattle.

Technical analysis: September feeder cattle futures pushed through resistance at the Aug. 1 high, opening downside risk to the bottom of last Monday's gap higher at $140.25, closely followed by the psychological $140.00 level.

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.


Price action: Lean hog futures ended mixed with October through February futures 10 to 55 cents lower and deferred months mostly 15 to 30 cents higher.

Fundamental analysis: While summer heat and high feed costs are expected to tighten supplies over the long-term, near-term fundamentals are a source of pressure, which weighed on nearby futures. Hog supplies are expanding seasonally, aided by cooler temps. Plus Labor Day buying is near complete.

But downside risk will be limited by ideas expanding supplies are already accounted for in prices, now-positive packer profit margins and the discount futures hold to the cash hog index.

Technical analysis: October lean hog futures ended in the middle of a narrow trading range today. Support is still at the double-bottom low of $74.90, while 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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