Livestock Analysis (VIP) -- March 4, 2013

March 4, 2013 08:47 AM
 

Hogs

Price action: Lean hog futures closed 20 cents to $1.00 lower, which was on or near session lows in most contracts.

Fundamental analysis: The price drop in lean hog futures extended today despite the heavily oversold condition of the market, confirming attitudes are very bearish. Traders remain concerned with demand, keeping attention off continued inclement weather in the Midwest, which is disrupting hog marketings.

Cash hog bids were steady at most locations today, although some weaker undertones surprisingly surfaced. While margins are strong and another winter storm is passing through the Midwest, most pork plants are well bought ahead on slaughter needs, allowing them to avoiding having to raise cash hog bids to attract supplies.

Technical analysis: April lean hog futures are heavily oversold at 12.94 on the 9-day Relative Strength Index, but the contract has been oversold for three straight weeks. The only remaining support on the daily chart is the contract low of $79.50.

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: April through August live cattle closed 20 to 45 cents higher, with the rest of the market narrowly mixed. All contracts ended high-range.

Fundamental analysis: Traders took a cautious approach to the market to start the week, but buying picked up around midday on strength in the boxed beef market. Choice beef values improved $2.03 and Select rose $1.34 this morning, but movement was light. The recent strong improvement in beef values signals retailers are preparing for spring features.

Early indications are this week's showlists are smaller in Nebraska and Kansas, but up slightly in Texas. But given recent weather-related stresses, marketable supplies may be tighter than initial indications due to lower weight gains. Traders generally expect $1 to $2 higher cash cattle trade at $129 to $130.

Technical analysis: April live cattle are trading at a premium to last week's cash trade, which reflects improved trader sentiment. The contract posted an inside day up on the daily chart, with initial resistance at Friday's high of $130.70. Bulls' next objective is the 38% retracement of the decline from the December high to the February low, which stands at $131.60.

Feeder cattle

Price action: Feeder cattle futures ended 20 to 97 1/2 cents higher, with nearby contracts leading gains.

Fundamental analysis: Feeder cattle were supported throughout the day by short-covering, but as corn futures weakened, buying picked up. Additional support came on spillover from live cattle futures.

Technical analysis: April feeder cattle futures posted an inside day of trade on the daily chart and need to climb back above the $148.00 level to signal a near-term low has been posted. Contract-low support is at $142.27 1/2.

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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