Livestock Analysis (VIP) -- December 27, 2012

December 27, 2012 09:24 AM
 

Hogs

Price action: Lean hog futures were weaker throughout the day amid profit-taking and ended with losses of 17 1/2 to 55 cents.

Fundamental analysis: A combination of economic concerns due to a lack of progress by Congress on the fiscal cliff and disappointing consumer confidence data for December led to a general risk-off day of trade for the commodity markets. This spilled into the livestock pits as traders worry that demand for red meat will wane if the U.S. slips back into a recession.

The cash hog market was mostly steady today, but traders also worked to trim the hefty premium nearby futures hold to the cash index. Early expectations are for steady bids again tomorrow.

Technical analysis: February lean hog futures gapped lower on the open, extended losses, but then closed near opening levels and remained within the boundaries of the uptrend established from the December low. Near-term boundaries are resistance at yesterday's high of $87.77 1/2 and support at the October high of $86.05.

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 were slightly to moderately lower throughout the day and ended 40 to 72 1/2 cents lower. Feeder futures extended losses to end 70 cents to $1.12 1/2 lower.

Fundamental analysis: A combination of profit-taking following yesterday's gains and negative outside markets weighed on cattle futures today. The Dow Jones Industrial Average posted triple-digit losses amid concerns the U.S. economy is headed over the fiscal cliff, as well as disappointing consumer confidence data for December (see "Evening Report" for more).

Meanwhile, traders are waiting on active cash cattle trade to begin and also trimmed the premium nearbys hold to last week's cash market. A few sales took place in Nebraska at $127 this afternoon -- steady with the week prior, but trade has yet to pick up elsewhere. Tighter showlists and strong beef movement so far this week have feedlots holding out for higher prices.

Technical analysis: February live cattle futures gapped slightly lower on the open, filled the gap, but then extended early losses to post a downside day of trade on the daily chart. The contract penetrated support at the November high of $132.90, but closed above this level. Initial resistance stands at last week's high of $134.40.

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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