Livestock Analysis (VIP) -- December 26, 2012

December 26, 2012 08:46 AM
 

Hogs

Price action: Lean hog futures saw two-sided trade and ended with slight losses of 10 to 45 cents.

Fundamental analysis: Early gains were limited to concerns about travel disruptions due to poor weather conditions in the eastern Corn Belt. But buying from weather concerns was limited as packers say they are well supplied for the week. The cash hog market was mostly steady today, with more of the same expected tomorrow.

Some light profit-taking was also due as traders worked to narrow the premium nearby futures hold to the cash index. However, some premium is "justified" by winter weather concerns.

Technical analysis: February lean hog futures briefly traded above yesterday's high but posted a low-range close. Today's high of $87.77 1/2 is initial resistance, followed by the November high of $88.25. Bulls continue to hold the technical advantage as futures remain in the steep uptrend established from the early December low.

Hedgers: Carry all risk in the cash market for now.

Feed needs: Carry all corn-for-feed and soybean meal risk in the cash market for now.

Cattle

Price action: Live cattle futures ended split, with the December through August contracts up 5 to 55 cents. Deferred futures ended narrowly mixed. Feeder futures ended 57 1/2 to 87 1/2 cents higher, supported by weakness in the corn market.

Fundamental analysis: Nearby live cattle futures were supported by expectations tightening supplies in January will lift the cash market. As a result, traders are comfortable with those contracts trading at a premium to last week's cash trade. Additional support came from strength in the boxed beef market, which points to higher cash cattle trade this week. This morning, Choice values were up $1.58 and Select rose $2.10 on strong movement of 170 loads.

Packers have not yet begun bidding for cattle, but traders expect cash trade to begin tomorrow as packers work to secure supplies after being closed for Christmas.

Technical analysis: February live cattle posted an upside day of trade on the daily chart. Initial resistance stands at last week's high of $134.40, with support at the November high of $132.90.

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: Carry all corn-for-feed and soybean meal risk in the cash market for now.

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