Livestock Analysis (VIP) -- June 20, 2013

June 20, 2013 09:35 AM


Price action: Lean hog futures ended mixed, ranging from 27 1/2 cents higher to 15 cents lower. Today's choppy price tone is fairly impressive given strong, widespread selling in the commodity sector today.

Fundamental analysis: Traders in the hog pit were able to shield themselves from sharp strength in the dollar index that triggered sharp weakness in markets like crude oil and soybean futures as traders remain hopeful domestic and export demand has been lifted at a time of tighter-than-expected market-ready supplies. Nearby futures also have more room to the upside as the July contract is trading at around a $3 discount to the cash index.

Traders will be focused on evening positions tomorrow ahead of the 2:00 p.m. CT USDA Cold Storage Report. Traders look for the report to show record-large frozen pork stocks for the end of May.

Technical analysis: August lean hog futures entered yesterday's gap area but posted a high-range close with losses of just a dime. Near-term boundaries are resistance at yesterday's high of $99.35, with support at Friday's low of $96.25.

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 opened under pressure on spillover from the commodity-wide sell-off prompted by the surge in the U.S. dollar and decline in equities. However, losses were moderate and were slowly trimmed in late trade. Futures closed near the day's highs.

Fundamental analysis: The collapsing stock markets and surging U.S. dollar index proved the primary driving force behind live cattle futures trade at the opening. Weakening dressed beef trade also factored into day's trading. However, with August futures already at a discount to last week's cash, traders were reluctant to press futures lower.

Technical analysis: August live cattle futures traded inside of yesterday's high-and-low range and posted a high-range close. That contract continues to trend sideways bracketed by resistance at $121 and support at $118.


Feeder cattle

Price action: Feeder cattle futures closed slightly lower near the day's high after posting a narrow trading range.

Fundamental analysis: Feeder cattle futures were lower on spillover from the commodity-wide sell-off but losses were limited. The selloff in corn futures proved supportive to feeder cattle futures. Futures continue to hold an $8 premium to the CME feeder cattle Index.

Technical analysis: August futures posted another inside day and closed at the day's high. The contract has been compressed in a narrowing trading range since mid-May. The $146 area provides resistance and $143 provides support.

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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