Livestock Analysis (VIP) -- December 12, 2013

December 12, 2013 08:47 AM


Price action: Lean hog futures firmed as the day progressed and futures ended 20 to 40 cents higher for the day, which was at or near session highs.

Fundamental analysis: The lean hog market benefited from light, corrective short-covering today amid ideas the downside has been overdone. A surge in pork movement yesterday along with mostly steady cash hog bids today added to the positive tone.

But pork movement moderated somewhat this morning and the pork cutout value softened by 87 cents. Plus plentiful supplies will likely continue to weigh on the cash market, and deferred contracts hold a steep premium to the cash hog index. These factors limited buying interest to corrective short-covering.

Technical analysis: February lean hogs ended steady with near-term support at $88.00. Followthrough pressure tomorrow would set up a challenge first of yesterday's low of $87.30, followed by the mid-August high of $86.25. Resistance is layered at the psychologically significant levels of $89.00 and $90.00.

Hedgers: 50% of expected 1st-qtr. marketings are hedged in Feb. lean hog futures at $89.70.

Feed needs: 25% of 1st-qtr. protein needs are covered in long March meal futures at $410.80.


Live cattle

Price action: Live cattle futures moved higher today but finished near their lows for the day. Futures closed 17 1/2 cents to 40 cents higher.

Fundamental analysis: Cattle futures jumped in the early going on the weakness in corn and soybean futures. The cash cattle trade remains unsettled but reports have surfaced of packers bidding $129 in the Texas market while feedlot operators held asking bids at $133 to $134. Traders looked for prices to settle in at $132 when trade actually occurs, which would be steady with a week earlier.

The wholesale trade saw mixed signals today, with Choice boxed beef $2.11 lower but Select beef 57 cents higher today. Movement was a positive 108 loads. Today's slaughter is estimated at 116,000 head, down from last week's 122,000 head and last year's 129,000 head.

Technical analysis: February live cattle futures gapped higher and left the gap unfilled when trading closed today. Futures moved higher but failed to hold those gains and finished near the day's lows. This sets up a test of the gap area on Friday. The gap runs from Wednesday's high of $132.87 1/2 to today's low of $133.05. The $133.70 area offers overhead resistance, but it will take a close above $135.00 to turn traders' heads.


Feeder cattle

Price action: Feeder cattle futures gapped higher at the open and firmed to close near their daily highs. Futures finished 77 1/2 cents to $1.40 higher, with January futures leading gains.

Fundamental analysis: Feeder cattle futures moved higher on the downturn in grain and soybean futures and firmer live cattle futures. The initial move through resistance triggered some buy stops.

Technical analysis: January feeder cattle futures gapped higher at the open and firmed through the day, making today's low of $166.67 1/2 support. The bottom of the gap is at $165.70. Today's action makes the $166.00 area a support zone. Resistance is at the Oct. 14 high of $169.22 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, but feeder cattle buyers should stay in touch to establish long coverage.

Feed needs: 25% of 1st-qtr. protein needs are covered in long March meal futures at $410.80.

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