Livestock Analysis (VIP) -- May 7, 2013

May 7, 2013 09:43 AM



Price action: Lean hog futures finished 12 1/2 to 50 cents higher in all but the June contract, which ended 2 1/2 cents lower. But for the day, futures didn't stray too far from unchanged.

Fundamental analysis: Focus in the market today was on reevaluating positions. Upside potential was limited by concerns retailers have completed their buying for Memorial Day, but pressure was limited by tightening market-ready supplies.

Due to negative profit margins, packer demand for cash hogs has been light so far this week. The cash hog market was mostly steady today and early expectations are for similar bids tomorrow. While supplies have tightened, pork cutout movement has also slowed to reduce packers' needs.

Technical analysis: June lean hog futures posted an inside day down on the daily chart. Futures ended the day just above support at yesterday's low of $91.15. Violation of this support tomorrow would make the psychological $90.00 level bears' next target. Resistance is at last week's high of $93.10.

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: Live cattle futures finished 25 to 65 cents lower, which was low- to mid-range in most contracts.

Fundamental analysis: Live cattle faced pressure from followthrough selling after a low-range close Monday. Concerns about a short-term top in the boxed beef and cash cattle markets added to the price pressure.

While boxed beef prices were mildly higher this morning following Monday's losses, movement was very light at just 76 total loads. Traders continue to feel the product market is in the process of topping Plus, there were reports of light, initial cash cattle sales at $126 in Texas and $127 in Iowa -- down from mostly $128 to $130 last week.

Technical analysis: June live cattle futures have posted three low-range closes in a row, signaling bears have a firm upper hand. That points to a near-term test of contract-low support at $119.40 -- despite the big discount the contract holds to the cash market.


Feeder cattle

Price action: Feeder cattle ended 90 cents to $1.52 1/2 lower, which was mid- to low-range for the day.

Fundamental analysis: In addition to a lack of buying interest in live cattle, technical-based selling weighed on feeder cattle today. Plus, corn futures favored a firmer tone the latter half of the day.

Technical analysis: May feeder cattle gapped to a new contract low and extended losses. Next support comes at $133.27 1/2 on the weekly continuation chart.

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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