Livestock Analysis (VIP) -- June 13, 2013

June 13, 2013 09:42 AM
 

Hogs

Price action: June lean hogs again gapped higher on the open and ended 62 1/2 cents higher for the day, which was a low-range close. In contrast, deferred months ended 5 to 52 1/2 cents lower for the day.

Fundamental analysis: Technical buying and tightening supplies again propelled the June lean hog contract, this time to a new-contract high. But as the market is technically overbought and the contract settled low-range, a reversal could be imminent, especially as the contract is at nearly a $2 premium to the cash hog index ahead of its expiration tomorrow. The $100-plus price on the June contract did limit selling interest in the July contract to profit-taking, however.

Tightening market-ready supplies kept the cash hog market steady to higher again today, though the fact that packers are cutting in the red and trimming kill hours does add a note of caution. Also, the pork cutout value fell 99 cents this morning, though movement was a strong 186.4 loads.

Technical analysis: July lean hogs spent most of the day chopping around the lower half of yesterday's trading range, but the contract found support at the $98.50 level, which roughly coincides with the February double-top high. A corrective bounce would have bulls eyeing this week's high of $99.90.

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 were under light price pressure throughout the day and ended 15 to 45 cents lower in the 2013 contracts and 20 cents to $1 lower in the 2014 contracts.

Fundamental analysis: Traders are waiting on cash cattle trade to begin and given this week's larger showlists and deterioration in Choice boxed beef values, traders aren't very optimistic packers will be willing to raise bids despite their positive profit margins. But while Choice beef values have softened this week, they remain above the key $200-per-cwt. level and movement has picked up to signal retailers are preparing for early July features.

Technical analysis: August live cattle futures remain confined within the boundaries of the month-long trading range, with contract-low support at $117.90 and resistance at the June high of $120.90.

 

Feeder cattle

Price action: Feeder cattle futures saw light profit-taking pressure following yesterday's strong gains to close 17 1/2 to 87 1/2 cents lower.

Fundamental analysis: Futures were vulnerable to profit-taking pressure following yesterday's gains. Futures were also pressured by the large premium nearbys hold to the cash index, which gives bears more room to the downside if they see fit.

Technical analysis: September feeder cattle futures posted an inside day of trade on the daily chart and posted a high-range close. Near-term boundaries are resistance at the mid-May high of $148.90 and support at the May low, which is also the contract low, of $144.80.

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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