Livestock Analysis (VIP) -- January 29, 2013

January 29, 2013 09:09 AM
 

Hogs

Price action: Lean hog futures saw two-sided trade today and most contracts ended in the upper half of their daily trading range. February futures settled 7 1/2 cents lower while the rest of the market ended with gains of 15 to 57 1/2 cents.

Fundamental analysis: Lean hog futures benefited from concerns about the approaching Midwest storm event that is expected to disrupt transportation of market-ready hogs for the second time this week. But as packers continue to deal with negative profit margins, most kept bids steady today.

While firmer pork prices yesterday did improve margins, slow movement may point to some resistance to higher prices. Pork movement this morning nearly matched yesterday's total, however. Spillover profit-taking from cattle also limited gains.

Technical analysis: February lean hogs were little changed for the day. Near-term support remains layered from the psychological $87.00 level to the bottom of last week's upside gap at $86.00. Initial resistance is at yesterday's high of $87.42 1/2, followed by the December high of $87.77 1/2 and the contract high of $88.25.

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: Following yesterday's sharp gains, live cattle futures were vulnerable to profit-taking pressure. Futures posted an inside day of trade and ended 7 1/2 to 67 1/2 cents lower.

Fundamental analysis: Pressure on today's setback was limited by the bullish fundamental picture. Traders still have the bullish Cattle on Report on their minds and they anticipate export demand will see a boost due to Japan finalizing its rule to import beef from animals under 30 months of age. Traders will also soon turn their attention to preparing for Friday's semi-annual Cattle Inventory Report.

However, with nearbys trading at around a $4 premium to the top end of last week's cash market, traders were hesitant to add to yesterday's gains. Traders are still waiting on signs the boxed beef market has posted a low, but much tighter market-ready supplies this week have traders looking for at least $2 higher cash cattle trade at around $126 in the Plains.

Technical analysis: No technical chart damage was done, with today's setback being "negligible" at best. February live cattle futures posted an inside day down on the daily chart, but remained well within the boundaries of yesterday's trading range.

 

Feeder cattle

Price action: Feeder cattle futures closed steady to $1.07 1/2 lower amid profit-taking pressure.

Fundamental analysis: January feeders closed mixed as traders are set with the task of keeping the contract in line with the cash index ahead of Thursday's noon CT expiration. Otherwise, feeder futures saw profit-taking pressure after yesterday's sharp gains.

Technical analysis: March feeder cattle futures filled yesterday's gap and posted a low-range close. Next support lies at the $148.00 level, with resistance at yesterday's high of $150.45.

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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