Livestock Analysis (VIP) -- July 1, 2013

July 1, 2013 09:36 AM



Price action: Lean hog futures got off to a firmer start, with the July contract posting a contract high. But this quickly gave way to profit-taking and futures ended steady to 45 cents lower for the day.

Fundamental analysis: Traders in the lean hog market exercised caution to start the week and the month as traders remain on-watch for a market top. The pork market gave some signs it may be working on a top late last week and today. This morning, pork cutout values slid 73 cents and just 112.9 loads of product changed hands.

But uncertainty about whether there is still some upside in the market with futures still at a discount to the cash market also kept selling interest in check. Pork performance this holiday-shortened week will be highly influential as to market action this week.

Technical analysis: August lean hog futures dipped through but settled even with the psychological $97.00 level. The next level of support is the June 14 low of $96.25 and the January low of $95.20. Resistance stands at last week's 2013 high of $99.65.

Hedgers: 50% of expected 3rd-qtr. production is hedged in Aug. lean hog futures at an average price of $97.67 1/2 and 50% of expected 4th-qtr. production is hedged in Dec. lean hog futures at an average price of $82.12 1/2.

Feed needs: All feed coverage has been lifted. Carry all risk in the cash market for now.



Live cattle

Price action: Live cattle futures closed 15 to 50 cents higher for the day, which was a high-range close for all but the front-month contract.

Fundamental analysis: Buying and selling interest was limited today as the market awaited cash clues this week. Showlist estimates are slightly lower this week thanks to a 7,000-head decline in Kansas. And there is some uncertainty about assessing likely packer demand following the July Fourth holiday. Last week, cash trade was mostly steady on the higher volume, which has some traders looking for a bottom in the boxed beef market. However, Choice boxed beef edged down 56 cents and Select slipped 82 cents in morning trade. Movement was also light at 70 loads.

Technical analysis: August futures nearly matched Friday's trading range and found support at Friday's low near $122.00 and at the short, two-week uptrend line. There is resistance at $123.00. The October contract trended higher, posting a higher high as well as a higher low and closing near the top of today's range. There is resistance at the bottom of the May 3 downside gap at $126.65. A two-week short uptrend provides rising support.

Feeder cattle

Price action: Feeder cattle futures trended higher through the day and closed near the top of the daily range with gains of $1.52 /2 to $1.77 1/2.

Fundamental analysis: Declining corn futures along with an increase in intended planted corn acres contained in Friday's USDA reports buoyed futures today. The stronger stock market and a weaker U.S. dollar index contributed to the gains. August futures are currently trading at a $12-plus premium to the cash index, reflecting positive trader views for late-summer feeder cattle prices.

Technical analysis: August feeder cattle futures moved higher, gaining strength as the trading day continued. Futures closed just off their daily highs. The August contract filled a downside gap left April 29 by trading up to $151.25. That contract has resistance at $152.00.

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: All feed coverage has been lifted. Carry all risk in the cash market for now.

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