Livestock Analysis (VIP) -- January 22, 2013

January 22, 2013 08:39 AM
 

Hogs

Price action: Lean hog futures favored a firmer tone throughout the day and finished 20 to 50 cents higher.

Fundamental analysis: With February lean hog futures trading in line with the cash index, traders are keeping a close watch on the cash hog market. The cash hog bids were mostly steady today amid varied demand, which limited buying in nearby lean hog futures. But concerns that frigid temps are stressing animals and limiting marketings helped to limit selling on futures. Due to the cold snap, some packers are short-bought and may be forced to raise bids tomorrow -- pushing profit margins further into the red.

Technical analysis: April lean hog futures posted an inside day of trade on the daily chart and finished mid-range. To signal a near-term low has been posted, the contract needs to fill the early January gap area at $89.45. Meanwhile, support lies at the January triple low of $86.90.

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 closed 27 1/2 to 80 cents higher, which was anywhere from low-range to high-range for the day.

Fundamental analysis: Ideas recent losses have been overdone fueled corrective buying in live cattle futures today. Support also came from bitterly cold temps, which are stressing cattle and will slow weight gains. But the February through August contracts backed well off session highs late, signaling traders aren't convinced a short-term low is in place.

Technical analysis: Despite today's gains, live cattle futures are still oversold, suggesting further corrective trade is needed to fully alleviate the situation. Key near-term support for February live cattle lies at last week's low of $124.85. Below that, support is at the April low at $124.30 and then the contract low at $123.70.

 

Feeder cattle

Price action: Feeder cattle futures posted gains of 50 cents to $1.07 1/2.

Fundamental analysis: Feeder cattle pulled support from strength in live cattle, which encouraged traders to cover short positions. A mildly firmer tone in the corn market for much of the day limited gains in feeder cattle.

Technical analysis: After spiking to a low and closing high-range last Friday, March feeder cattle closed above old support at $146.85. Consecutive higher closes above this level would hint at a short-term low. The 9-day Relative Strength Index signals the contract is still oversold, but the 14-day RSI pushed out of oversold territory.

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: 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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