Livestock Analysis (VIP) -- March 12, 2013

March 12, 2013 09:47 AM
 

Hogs

Price action: Lean hog futures closed 15 to 85 cents higher, which was a mid- to low-range close for the day.

Fundamental analysis: Lean hog futures were supported by short-covering today, but with demand concerns continuing to hang over the market, gains were trimmed into the close. While retailers are stocking up on hams for Easter, there are broader demand concerns once the seasonal buying passes.

Cash hog bids were steady to lower again today amid limited packer demand. Most plants are well supplied for the week and are looking to strengthen margins.

Technical analysis: April lean hog futures must push above last week's high at $82.25 to extend the correction off the contract low. A close above that level would make the September low at $84.07 1/2 bulls' next upside target.

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

Feed needs: Profits have been claimed on 1st-qtr. feed coverage that was held in March corn and meal futures. 25% of 2nd-qtr. corn needs are covered in long July corn futures at $6.78 3/4 and 25% of 2nd-qtr. protein needs are covered in long July soymeal futures at $388.00.

Live cattle

Price action: Live cattle futures settled with gains of 45 to 65 cents, which was high-range for most contracts.

Fundamental analysis: Cattle traders covered short positions today as they are unwilling to be caught short considering uptrending boxed beef prices. Select cuts rose to a new all-time nominal high of $196.73 this morning (just 92 cents below Choice values). But the lofty beef prices have coincided with a marked decline in beef movement, which is limiting traders' willingness to add long positions.

Cash cattle prospects are up in the air in light of conflicting boxed beef signals and steady showlist numbers with last week. Nearby futures are at a slight premium to last week's $128 cash cattle trade.

Technical analysis: April live cattle continue to make their way toward resistance at the January double-bottom low of $129.45, after which resistance stands at the psychological $130.00 mark. Yesterday's nearly 11-month low of $127.10 is strong support.

 

Feeder cattle

Price action: Feeder cattle futures finished at or just off session highs with gains of 32 1/2 to 95 cents.

Fundamental analysis: Feeder cattle futures have recently been bouncing around technically oversold territory according to the 9 and 14-day Relative Strength Index. Traders worked to correct that state today, encouraged by early weakness in the U.S. dollar index and spillover from live cattle and lean hogs. Gains were limited to short-covering due to strength in the corn market and the premium nearby contracts hold to the cash index.

Technical analysis: May feeder cattle futures settled high-range, which should give bulls the upper hand to start tomorrow's session. They will target the top of the March 6 downside gap at $143.57 1/2. Strong support remains at last week's contract low of $140.95.

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: Profits have been claimed on 1st-qtr. feed coverage that was held in March corn and meal futures. 25% of 2nd-qtr. corn needs are covered in long July corn futures at $6.78 3/4 and 25% of 2nd-qtr. protein needs are covered in long July soymeal futures at $388.00.

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