Livestock Analysis (VIP) -- March 19, 2013

March 19, 2013 09:50 AM
 

Hogs

Price action: Lean hog futures were choppy early but ended 57 1/2 cents to $1.17 1/2 lower.

Fundamental analysis: Early price action was choppy, with pressure limited by ideas the downside has been overdone. But as the dollar strengthened, traders adopted a "risk-off" stance and buyers moved to the sidelines.

The cash hog market was mostly steady today amid light demand despite some weather-related travel disruptions across the Midwest. Packers are working on improving profit margins as they remain concerned about pork demand. There is more near-term downside risk for April hogs, as the contract is trading at around a $2 premium to the cash index.

Technical analysis: April lean hog futures posted a fresh contract low of $77.85 and a contract-low close of $78.22 1/2. The contract has reentered oversold territory at around 25.3, according to the 9-day Relative Strength Index (RSI). But as we have seen recently, the contract could dip deeper as earlier this month it posted a RSI reading of 10.1.

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 ended 25 to 75 cents lower, which was near the middle of today's range for most contracts.

Fundamental analysis: Cattle futures were choppy early, but softened ahead of midday as the U.S. dollar strengthened. Demand concerns continue to hang over the market and a rising dollar has traders concerned exports could be hurt. Adding to the demand concerns, boxed beef movement was again light this morning at only 76 loads and prices were mixed.

Cash cattle negotiations have yet to get started, as packers have not issued initial bids. With cattle futures slumping and beef movement remaining slow, packers are not likely to raise cash cattle bids from the $127 they paid last week in the Plains.

Technical analysis: April live cattle posted a contract low and contract-low close. Key near-term support now lies at the February low of $124.50 on the weekly continuation chart. To signal a short-term low is in the works, the contact must push above the downtrend from the January highs. That trendline intersects just beneath $129.00 Wednesday.

 

Feeder cattle

Price action: Feeder cattle futures finished 52 1/2 cents to $1.02 1/2 lower, which was in the upper end of today's range.

Fundamental analysis: Feeder cattle futures were pressured by spillover from live cattle and corn, along with price-negative outside markets. Modest intra-day short-covering amid ideas the downside has been overdone allowed the market to come off session lows late.

Technical analysis: April feeder cattle gapped to a new low and extended losses, with today's low at $137.52 1/2 the new contract low. To signal a low is in the works, the contract must push above downtrending resistance from the January highs.

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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