Livestock Analysis (VIP) -- March 14, 2013

March 14, 2013 09:19 AM
 

Hogs

Price action: Lean hog futures got off to a mixed start, weakened at midday, but strengthened into the close to finish 5 to 45 cents higher.

Fundamental analysis: Earlier pressure gave way to short-covering as traders anticipate the downside has been overdone and a seasonal uptick in pork prices should be coming soon. But until that happens, demand for cash hogs will remain lackluster. The cash market was steady to lower today as packers say they are well supplied.

Bottom pickers are also hopeful that pork demand upticks as consumers realize it is a value compared to beef, which is historically high. For this reason, traders are comfortable with April lean hog futures at around a $3 premium to the cash index, although further weakness in the cash market could erode this premium.

Technical analysis: Near-term boundaries for April lean hog futures is support at last week's low of $78.25 and resistance at last week's high of $82.25. But the contract needs closes above the September low of $84.07 1/2 to confirm a near-term low has been posted.

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 finished in the middle to lower end of today's range with losses of 30 to 75 cents.

Fundamental analysis: Uncertainty with cash cattle trade for the week limited buying interest in live cattle futures again today. Given demand concerns, traders are taking a prove-it attitude as they await active cash cattle trade. Selling interest was kept in check by weekly export sales of 31,500 MT, which were a marketing-year high.

Packers raised cash cattle bids to $127 in the Plains, but that's still $3 below what feedlots are seeking. With packers moving cash bids higher today, it appears at least steady cash cattle prices compared with last week's $128 trade are likely, although not certain.

Technical analysis: April live cattle futures continue to chop within the established short-term boundaries at $127.10 and $130.80.

 

Feeder cattle

Price action: Feeder cattle futures finished 72 1/2 cents to $1.37 1/2 lower today, which was in the lower end of today's range.

Fundamental analysis: A generally firmer tone in the corn market and a lack of buying interest in live cattle pressured feeders. Traders also remain concerned about slackened demand for cash feeder cattle.

Technical analysis: April feeder cattle futures continue to hover just above contract-low support at $140.95 as the contract struggles to put in a low.

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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