Livestock Analysis (VIP) -- June 10, 2013

June 10, 2013 09:46 AM


Price action: Lean hog futures gapped higher on the open, gained strength in mid-morning trade (with the July contract moving limit higher) before settling back to close mid-range for the day. Bull-spreading resulted in moderate to strong gains in the first three contracts and moderate losses in farther deferred contracts.

Fundamental analysis: Futures opened higher on firm fundaments including improving pork values and then exploded to limit higher on rumors China is buying U.S. pork. Some profit-taking then set in as no further information surfaced concerning the rumors. The pork cutout value rose $1.28 in morning trade and movement was moderate.

Technical analysis: July futures proved the most explosive today, opening with a large gap, rising above resistance at two downside gaps left in early February. The surge took out resistance at the February high of $98.50. The limit-up move reached $99.20, exactly matching the highest price notched in July futures for the year. The June and August contracts left small unfilled gaps. Profit-taking resulted in lower closes for the October through April 2014 contracts and reversal patterns on those charts.

On the July, today's high of $99.20 exists at upside resistance with today's low of $97.27 1/2 as initial support. The bottom of today's gap (Friday's high) at $96.30 will serve as the downside target if support at today's low is taken out.

Hedgers: Carry all risk in the cash market for now.

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



Live cattle

Price action: Live cattle futures extended Friday's losses and ended 45 to 92 1/2 cents lower.

Fundamental analysis: On top of followthrough from Friday's losses, live cattle futures were pressured by concerns about the cash market after only light cash trade at $2 lower prices surfaced late last week. A larger showlist this week means it will take strength in the boxed beef market to help stabilize the cash cattle market.

Boxed beef prices were firmer this morning on solid movement of 124 loads. If the market continues to strengthen it would build a case for a near-term low.

Technical analysis: August live cattle futures gapped lower on the open and tried to fill this morning gap but ended near session lows. Bears' next target is contract-low support at $117.90 with initial resistance at last week's high of $120.90.


Feeder cattle

Price action: Feeder cattle futures closed 10 to 27 1/2 cents lower in the 2013 contracts, with far-deferred contracts mixed.

Fundamental analysis: Pressure on feeder cattle futures was limited by weakness in the corn market, but without strength from live cattle, it was difficult for feeders to generate much more than short-covering.

Technical analysis: August feeder cattle futures posted a slight downside day of trade on the daily chart after briefly trading above resistance at Friday's high. Followthrough pressure tomorrow would have bears targeting contract-low support of $142.50.

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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