Livestock Analysis (VIP) -- May 21, 2013

May 21, 2013 09:43 AM
 

 

Hogs

Price action: Lean hog futures closed slightly higher in all but some of the extreme far-deferred contracts that closed steady. Most contracts ended near mid-range for the day.

Fundamental analysis: Lean hog futures built on yesterday's gains today coming off sharp losses in summer-month contracts today. In addition to mild short-covering, the discount nearby futures hold to the cash market was supportive.

Cash hog bids were steady at most Midwest locations today. While packers are working to improve margins, tightening market-ready supplies should be enough to keep cash hog bids from softening. But downtime around the Memorial Day holiday should somewhat limit packer demand for cash hogs the rest of the week.

Technical analysis: June lean hog futures must push above last week's high at $93.60 to attract fresh chart-based buying. Thus far, buying interest around $93.00 has been limited. To the downside, the May 10 low at $90.00 is key near-term support.

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: Futures opened higher and remained higher through the day closing near the session high. Futures closed mostly 90 cents to $1.30 higher.

Fundamental analysis: Demand concerns moved to the back-burner today as Choice beef prices moved to a new record high for the seventh consecutive day, expectations are building for at least steady cash trade and June futures remain at a sharp discount to last week's cash action. This morning Choice beef rose 21 cents to $210.46. However, movement was again light. That light movement is a sign, some argue, that demand problems are building.

Technical analysis: June live cattle futures pressed higher today and spent most of the day above Monday's high. The June contract's close at $121.10 is the highest close since May 6. There is light resistance at $121.50. A close above that level would set up a test of the May high at $124.00. A close above that level is needed to confirm a near-term low. Supports is layered below $119.50 to the contract low of $118.80.

 

Feeder cattle

Price action: Except for the soon-to-expire May contract, futures closed sharply higher and near the day's highs with gains ranging from $1.95 to $2.07 1/2.

Fundamental analysis: Futures trended higher in conjunction with the rise in live cattle futures and the downturn in corn futures. Recent rains in the Southern Plains may revive range and pasture conditions, which would restart herd rebuilding that would restrict feeder cattle numbers in the near term. USDA's update yesterday reflected some improvement in pasture and range conditions as of Sunday.

Technical analysis: August feeder cattle futures gapped higher at the open and moved higher through the day. This morning's gap coupled with the downside gap left Monday results in a potential island bottom. Since feeder cattle futures routinely post gaps, it will take a close above the May 13 high of $147.47 1/2 to get traders excited about today's island bottom. It will take a close above $149.00 over the next few days to break the winter downtrend line.

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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