Livestock Analysis (VIP) -- January 30, 2012

January 30, 2013 08:51 AM
 

Hogs

Price action: Lean hog futures have seen choppy trade in recent days and today was no exception. Futures ended 37 1/2 cents lower to 25 cents higher for the day. Most contracts settled low-range.

Fundamental analysis: Traders in the lean hog market lacked direction today. While recent gains in the pork cutout market have improved packer profit margins to near breakeven, more will be needed to make them willing to raise bids. Meanwhile, the winter storm in the Midwest led to varied demand and bids today as it disrupted both transportation and slaughter in the western Corn Belt, resulting in steady to higher cash hog bids there, while bids in eastern locations are mostly steady with few lower bids.

Meanwhile, supplies are tightening seasonally, which should keep a floor under both futures and cash prices.

Technical analysis: February lean hogs traded up to a new monthly high of 87.50 today, but buying interest quickly faded and the contract settled steady with opening levels. Today's high is initial resistance, while support remains at the bottom of last week's upside gap at $86.00.

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 were choppy throughout the day and ended narrowly mixed.

Fundamental analysis: Traders' focus was on evening positions in light of recent sharp gains. Nearby futures softened in late trade of news that cash cattle trade was picking up at $125 in Kansas and Oklahoma, but had not yet started in Texas. While this is up $2 to $3 from last week, February live cattle are trading at around a $3 premium to the cash market.

Traders will begin to more actively even positions tomorrow ahead of Friday afternoon's semi-annual Cattle Inventory Report. According to pre-report average guesses, traders look for all cattle and calves to come in at 98.2% of year-ago levels -- implying a U.S. cattle herd of 89.135 million head, the smallest inventory since 1952.

Technical analysis: February live cattle futures briefly traded through support at the top of Monday's gap (Monday's low) of $127.85, but didn't come close to closing the gap. Resistance stands at this week's high of $129.00, with key support at the January low of $124.85.

 

 

Feeder cattle

Price action: Feeder cattle futures were also mixed throughout the day, with nearbys ending slightly higher and deferreds mostly slightly lower.

Fundamental analysis: Tight calf supplies helped to limit pressure on futures, but deferred contracts ended lower due to strength in the grain markets. Price action in January feeder futures will be limited ahead of tomorrow's noon CT expiration as it is trading at a slight premium to the cash index.

Technical analysis: March feeder futures posted a very narrowly traded session, remaining within the boundaries of yesterday's trading range. Near-term boundaries are support at the December low of $147.82 1/2, with initial resistance at this week'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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