Livestock Analysis (VIP) -- July 24, 2013

July 24, 2013 09:37 AM
 

Hogs

Price action: Lean hog futures saw a choppy day of trade and ended narrowly mixed and high-range for the day.

Fundamental analysis: Monday's Cold Storage Report resulted in a much-improved demand and technical picture for the lean hog market on Tuesday. Today hog futures saw some light profit-taking, but traders displayed no urgency to close yesterday's big upside chart gap. Improved pork movement in recent sessions added to the positive tone, though a $2.50-slide in the pork cutout value today could be telling of seasonally building supplies ahead.

Cash hog bids were mostly flat today, with scattered bids on either side of unchanged thanks to varied demand. Hog supplies are still tight but packers are working to improve negative margins.

Technical analysis: August lean hogs saw an inside day of trade, leaving support and resistance at yesterday's low of $98.25 and high of $99.20, respectively. The high-range close should give bulls the advantage to start the next session. Bulls will eye the June high of $99.65 on an upside breakout.

Hedgers: 3rd-qtr. hedges have been exited. 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 faded late to end steady to 32 1/2 cents lower through the June 2014 contract, which was low-range for the day.

Fundamental analysis: Live cattle futures favored the upside through the morning as traders had hopes for firmer cash cattle trade in the Plains after packers moved bids to $119 -- steady with week-ago. But buying interest faded as word of $119 cash trade in Kansas surfaced. August futures still hold a $2.50-plus premium to the initial cash cattle trade.

While Kansas feedlots began selling cattle at steady prices, feedlots in other areas of the Plains held out for potentially firmer cash bids. A sluggish product market limits the likelihood packers will raise cash bids, though boxed beef prices were firmer this morning, potentially signaling the market may finally be finding a short-term low.

Technical analysis: August live cattle futures continue to hold a short-term consolidation range from $121.00 to $123.10. The breakout from this range is likely to trigger the next trending move.

Feeder cattle

Price action: Feeder cattle futures finished 25 to 62 1/2 cents lower and near session lows.

Fundamental analysis: Recent price strength, the premium feeders hold to the cash market and late weakness in the live cattle market triggered light profit-taking in feeder cattle futures. But pressure on the corn market helped limit selling interest.

Technical analysis: Key near-term support for August feeder cattle futures lies at $152.17 1/2. A drop below that level would suggest the contract has posted a short-term top and is going to make another push lower. But if that support holds, it should push the contract toward a test of resistance at the April high of $154.40.

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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