Livestock Analysis (VIP) -- December 24, 2013

December 24, 2013 07:09 AM


Price action: Lean hog futures closed steady to 32 1/2 cents lower in very narrow trading with the exception of the April contract, which closed 10 cents higher.

Fundamental analysis: Lean hog futures traded slightly lower in a very narrow pre-holiday range on lower cash hog prices. This morning's wholesale pork trade provided light support as it showed a rise of 66 cents in the pork cutout value and movement was a healthy 319.7 loads. Light support also came from yesterday's Cold Storage Report, which showed total pork stocks in storage at the end of November were slightly less than anticipated at 546.333 million pounds. But hog supplies remain large and the holiday-disrupted kill schedule puts additional negative pressure on prices.

Traders are looking ahead to this Friday's Quarterly Hogs & Pigs Report. Analyst surveys show they expect the report to show All Hogs and Pigs on Dec. 1 at 99.9% of year-ago levels, Kept for Breeding at 101% and Kept for Marketing at 99.8% of year-ago levels.

Technical analysis: February live hog futures traded in a 30-cent range with support at $85.50 and resistance at $86.50, followed by psychological resistance at $87.00. The Aug. 26 gap running from $84.55 to $85.00 serves as a downside target if support fails.

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 closed narrowly mixed with a slight downside bias.

Fundamental analysis: Traders used today's session to take some profits following gains the previous three days. But selling interest was limited as trading volume and market participation was light. More light and choppy trade is expected after the one-day Christmas break as some traders will take an extended holiday. But at least there will eventually be cash cattle trade to help shape price direction late this week.

Most traders are riding the fence, looking for prices to be about steady with last week's $130 trade in the Plains. But with bids and asking prices not yet established, cash cattle trade is still very much up in the air and could depend on late-week boxed beef trade.

Technical analysis: Monday's high at $134.32 1/2 is initial resistance for the February contract, followed by heavily layered resistance from $134.70 to $135.40. Last Friday's gap from $133.40 to $133.10 is initial support, followed by stronger support from $132.12 1/2 to the November low of $131.27 1/2.


Feeder cattle

Price action: Feeder cattle futures finished 42 1/2 to 52 1/2 cents lower through the May contract. Far-deferred contracts were mixed.

Fundamental analysis: Feeder cattle futures favored a weaker tone on mild spillover from the live cattle market and light profit-taking. But traders showed little willingness to actively move the market in today's lightly traded session.

Technical analysis: January feeder cattle futures have formed a short-term uptrend from the November low, but the overall price pattern since October is choppy. Key support and resistance are at the November low of $162.05 and the October high at $169.22 1/2, respectively.

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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