Livestock Analysis (VIP) -- August 6, 2013

August 6, 2013 09:42 AM
 

Hogs

Price action: Lean hog futures ended steady to 95 cents higher in all but the far-deferred contracts that closed 5 to 20 cents lower. Nearbys posted a mid- to high-range close.

Fundamental analysis: Futures found early support on followthrough from yesterday's gains, with steady to $1 higher cash hog bids adding to early strength. Sharp gains in the pork cutout market at midday helped to keep prices supported and raised expectations the market has posted a near-term low.

August lean hog futures have moved in line with the cash index, but October lean hogs ended the day at around a $14 discount to the index, which opens the door for more near-term upside potential. But traders will be comfortable with some discount priced into fall-month futures as supplies are seen steadily climbing through year's end.

Technical analysis: October lean hog futures gapped higher on the open, briefly set back, but extended gains and left a gap open on the daily chart. Bulls' next target is the July high of $86.87 1/2, followed by the June high of $87.00. Support is at the July low of $82.95.

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 softened into the close, but nearbys still ended 12 1/2 to 37 1/2 cents higher. Deferred futures ended mixed.

Fundamental analysis: Price action in cattle futures was lackluster, as traders continue to weigh tightening supplies against disappointing demand. While early support came on hopes the boxed beef market is working on a near-term low, beef prices were mixed this morning on light movement. The lackluster performance in the beef market doesn't bode well for this week's cash trade, although showlists are about steady with week-ago. Early expectations are for at least steady cash trade given the prospect of tightening supplies.

Technical analysis: October live cattle futures couldn't sustain buying above the $125.00 level, marking that as initial resistance. Support is at last week's low of $124.12 1/2. In order to revive market bulls, futures need to return above the July high of $126.95.

 

Feeder cattle

Price action: Feeder cattle futures ended 27 1/2 to 72 1/2 cents higher, which was high-range for the day.

Fundamental analysis: Feeder futures were supported by weakness in the corn market and tightening calf supplies. August feeder cattle futures ended the day at around a $5 premium to the cash index, as traders expect the cash market to continue strengthening.

Technical analysis: October feeder cattle futures gapped to a month high of $159.90 on the open and posted a high-range close. Contract-high resistance stands at $164.75.

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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