Livestock Analysis (VIP) -- June 3, 2013

June 3, 2013 09:17 AM


Price action: Lean hog futures saw a choppy day of trade and ended 20 cents higher in the front-month and 15 to 67 1/2 cents lower in deferred contracts.

Fundamental analysis: Cash hog bids were mixed today as some packers are considering trimming their kill hours in an effort to improve profit-margins, which have been hovering around breakeven of late. Tightening market-ready hog supplies have kept the cash hog market pointed higher in recent weeks, while the pork market has recently been mixed. This morning, the pork cutout value firmed 10 cents on decent movement of 167.7 loads.

While the pork market has benefited from a record-setting surge in the boxed beef market, a cool, rainy start to the summer grilling season is less than ideal.

Technical analysis: July lean hog futures continued in their gradual uptrend since mid-May today, with bulls' next target being the $95.00 level, followed by the January low of $95.80. But the contract posted a low-range finish today, which could signal stepped-up profit-taking and a test of support at the April high of $93.15 is possible.

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 finished 57 1/2 cents to $1.02 1/2 lower, which was in the lower end of today's range but off session lows.

Fundamental analysis: Demand concerns continue to hang over the cattle market, keeping traders comfortable with futures at a sizable discount to the cash market. Those demand concerns were incentive for traders to sell cattle futures today after a modest, corrective price recovery last week.

Morning boxed beef trade saw Choice cuts firm 45 cents while Select boxes were 55 cents lower. But most importantly, movement was light at 97 loads. If movement stays light, it would suggest last week's pickup in retailer purchases was little more than restocking of meat cases following the Memorial Day holiday.

Technical analysis: Key near-term support for August live cattle lies at the contract low of $117.90. To the upside, the May 21 correction high at $120.60 is initial resistance, but the contract must push above the May high at $124.10 to signal the contract is seriously working on a low.


Feeder cattle

Price action: Feeder cattle futures closed narrowly mixed following a choppy day of trade.

Fundamental analysis: Feeder cattle futures were pulled in opposite directions today as pressure from the weakness in live cattle was offset by support from the pressure on corn. Neither proved to be the dominant factor.

Technical analysis: August feeder cattle futures continue to chop around just above the contract low of $142.50, which is near-term support. To the upside, the long-term downtrend from the winter highs is currently intersecting just above $148.00 and is key resistance.

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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