Livestock Analysis (VIP) -- August 28, 2013

August 28, 2013 09:44 AM


Price action: Lean hog futures faced pressure throughout the day and futures ended steady to 55 cents lower, which was a low-range close.

Fundamental analysis: Profit-taking pressured lean hogs today amid strength in the U.S. dollar index and concerns demand will soon slow as hog supplies build. But a drop in average hog weights for Iowa and Minnesota last week signals recent and ongoing high temps will prevent this expansion from occurring for the time being.

The pork cutout value plunged $5.25 this morning, but this encouraged impressive movement of 325.3 loads. Mixed fundamentals could keep the market choppy over the near-term.

Technical analysis: December lean hogs saw an inside day of trade, leaving support at the bottom of Monday's upside gap at $81.10. The contract tested but failed to move through resistance at the July double-top of $83.45. A move through that level would make bulls' next target yesterday's high of $83.70, which coincides with the June high.

Hedgers: 50% of expected 4th-qtr. production is hedged in Dec. lean hog futures at an average price of $82.12 1/2.

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


Live cattle

Price action: Live cattle futures were stronger throughout the day, but trimmed gains into the close and finished 20 to 37 1/2 cents higher.

Fundamental analysis: Futures were supported throughout the day by prospects of tightening supplies, but upside potential was limited by expectations for steady cash cattle trade this week. While boxed beef prices continue to inch higher, movement remains lackluster and this week's cattle showlist is up from last week. Traders say that's a recipe for steady cash cattle trade later in the week.

Technical analysis: October live cattle futures gapped slightly higher on the open and extended gains, but softened into the close and posted a low-range close. Important support lies at the top of the Aug. 8 gap at $126.40 and extends to the bottom of the gap at $125.42 1/2. Resistance stands at the August high of $129.05.


Feeder cattle

Price action: Feeder cattle futures ended steady in the front-month contract, with the rest of the market up 64 to 77 1/2 cents.

Fundamental analysis: Feeder futures were supported by weakness in the corn market and tightening calf supplies. The cash feeder index remains strong at nearly $155.00. Nearby futures are trading in line with the index.

Technical analysis: September feeder cattle futures gapped higher on the open and closed near opening levels. Near-term boundaries are resistance at the August high of $158.50 and support at Monday's spike low of $154.10.

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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