Livestock Analysis (VIP) -- February 11, 2013

February 11, 2013 08:43 AM
 

Hogs

Price action: Lean hog futures finished with slight gains through the August contract, while far-deferred contracts were steady to slightly lower.

Fundamental analysis: Modest support today came from ideas the downside has been overdone recently and the discount nearby futures hold to the cash market. Aside from corrective buying, however, the upside is limited as the cash hog market is expected to remain under pressure near-term.

Cash hog bids were steady to weaker today on limited packer demand. Given deeply negative packer margins, demand for cash hogs will remain limited as some plants will cut back on kill hours instead of actively competing for supplies.

Technical analysis: April lean hog futures must close above old support at the January triple-bottom at $86.90 to signal a short-term low has been posted. Today's low at $85.70 is initial support, though the next level of strong support lies at the September low of $84.07 1/2.

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

Feed needs: 25% of 1st-qtr. corn needs are covered in long March corn futures at $6.87 and 25% of 2nd-qtr. Corn needs are covered in long July corn futures at $6.78 3/4. 25% of 1st-qtr. protein needs are covered in long March soybean meal futures at $395.30 and 25% of 2nd-qtr. Protein needs are covered in long July soybean meal futures at $388.00.

 

 

Live cattle

Price action: Live cattle futures ended 15 to 50 cents higher in all but the August contract, which ended 5 cents lower.

Fundamental analysis: While traders remain concerned about last week's softer boxed beef values and the impact on packers' profit margins, futures were supported today by forecasts for winter storms moving into cattle county this week. Additionally, cash sources say this week's showlist is smaller, which will give feedlots more bargaining power in this week's cash negotiations.

Boxed beef values were mixed this morning on solid movement and traders are watching for signs of a seasonal uptick in beef prices.

Technical analysis: April live cattle violated support at the double-bottom January low of $129.45 before recovering. To signal a near-term low has been posted, the contract needs to return above the late January high of $133.65.

 

Feeder cattle

Price action: Feeder cattle futures settled 42 1/2 cents to $1.07 1/2 higher in all but the front-month March contract, which ended 20 cents lower.

Fundamental analysis: Futures were largely supported by weakness in the corn market, although buying in March futures was limited given recent choppy action in the cash market.

Technical analysis: March feeder cattle futures posted a new contract low of $143.50 today, marking it as initial support. Futures are oversold according to the 9-day Relative Strength Index and due for a price or time correction. The contract needs to return above the late January high of $150.45 to signal a near-term low has been posted.

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. corn needs are covered in long March corn futures at $6.87 and 25% of 2nd-qtr. Corn needs are covered in long July corn futures at $6.78 3/4. 25% of 1st-qtr. protein needs are covered in long March soybean meal futures at $395.30 and 25% of 2nd-qtr. Protein needs are covered in long July soybean meal futures at $388.00.

 

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