Livestock Analysis (VIP) -- December 5, 2013

December 5, 2013 08:50 AM
 

Hogs

Price action: Lean hog futures closed mostly 22 1/2 to 37 1/2 cents lower with the exception of the soon-to-expire December contract that closed $1.15 lower. Aside from December hogs, most contracts closed mid-range.

Fundamental analysis: Lean hog futures were under pressure due to weaker cash and wholesale pork prices and high supplies. The December contract saw pressure as traders moved to align it with the cash hog index, which occurred by the close of trade today. Meanwhile, February futures carry a near-$6 premium to the index, which hints at potential pressure for that contract once December futures expire unless hog supplies decline.

Traders shrugged off news U.S. pork exports reached 435.2 million lbs. in October, up from 394.925 million lbs. in September but down from 492.757 million lbs. a year earlier.

Technical analysis: February futures posted an inside day today versus Wednesday's narrow trading range. Overhead resistance starts at $89.55. It takes a close above $90.50 to break the November downtrend line but resistance sits at $91.40 to $92.00. Support rests around $85.00 if support at $88.05 breaks.

Hedgers: 100% of expected 4th-qtr. production is hedged in Dec. lean hog futures at an average price of $83.74; 50% of 1st-qtr. marketings are hedged in Feb. lean hog futures at $89.70.

Feed needs: Profits were claimed on the long hedges held on 25% of 4th-qtr. protein needs in Dec. soybean meal futures. 25% of 1st-qtr. protein needs are covered in long March meal futures at $410.80.

 

 

Live cattle

Price action: Live cattle futures finished 80 cents to $1.52 1/2 lower in the first five contracts. October and December 2014 futures finished 50 cents to 22 1/2 cents lower, respectively. The February contract led declines.

Fundamental analysis: Live cattle futures slumped despite news of steady $132 cash cattle trade in the Southern Plains. Despite the steady cash trade, wintry weather moving into the country's midsection and ongoing tight market-ready supplies, December cattle are now trading at a slight discount to the cash market.

The wholesale beef trade provided mixed messages as it showed a 58-cent decline in the value of Choice boxed beef this morning but a $1.15 rise in Select beef. Movement, which picked up somewhat Wednesday, was light in morning trade, adding to the negative tone on front-month contracts.

The market gained little support from news beef exports rose to 234.735 million lbs. in October compared to 212.322 million lbs. in September and 222.632 million lbs. a year earlier.

Technical analysis: February live cattle futures slumped early and tripped sell stops as the early morning plunge penetrated this week's lows. The next level of support for the contract starts at $132.50. The fall uptrend line provides support at $131.75. The $133.75 area, Tuesday's low, is now resistance.

 

Feeder cattle

Price action: Feeder cattle futures slumped late in the session, closing near their lows for the day and posting losses of 90 cents to $1.05.

Fundamental analysis: Feeder cattle futures posted slight gains through much of the day on weakness in corn futures. But the late-session selloff in live cattle futures pulled feeder cattle futures down.

Technical analysis: January futures penetrated yesterday's low, filling the small upside gap left Nov. 27. The contract finished the day resting on top of a support area that runs down to the Nov. 19 low at $162.05. Resistance now starts at $164.60. It takes a close above $166.00 to give the bulls the upper hand.

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: Profits were claimed on the long hedges held on 25% of 4th-qtr. protein needs in Dec. soybean meal futures. 25% of 1st-qtr. protein needs are covered in long March meal futures at $410.80.

 

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