Livestock Analysis (VIP) -- November 13, 2012

November 13, 2012 08:53 AM


Price action: Lean hog futures finished 17 1/2 to 57 1/2 cents higher in all but some of the extreme far-deferred contracts, although that was good for only a mid-range close.

Fundamental analysis: Lean hog futures rushed to moderate to strong gains this morning, largely amid unexpected strength in the cash hog market. While packers paid steady to lower prices for cash hogs in most locations, some western Belt plants unexpectedly raised cash hog bids. This is seen as temporary strength, however, which triggered intra-day profit-taking that pulled futures well off session highs.

Additional support for hog futures came from hopes seasonal demand will be enough to offset hefty market-ready supplies in the coming weeks.

Technical analysis: February lean hog futures scored a contract high and a contract-high close. Today's new high at $87.27 1/2 is the only remaining daily chart resistance. December lean hog futures are still working to close above the July 31 high at $80.75 with the July high at $82.25 next resistance above that level.

Hedgers: Carry all risk in the cash market for now.

Feed needs: Carry all corn-for-feed and soybean meal risk in the cash market for now.



Live cattle

Price action: Live cattle futures finished strong to post bullish reversals in nearly all contracts. The December through October 2013 contracts ended 45 to 52 1/2 cents higher.

Fundamental analysis: Early pressure came on followthrough from widespread commodity selling and news this week's market-ready supplies were up sharply from last week. But ideas the boxed beef market has marked a near-term low attracted fresh buying. Choice boxed beef values improved 74 cents this morning and Select rose $1.92 on decent movement of 99 loads. Cash expectations are still uncertain, but if the boxed beef market continues to improve, steady cash bids will be possible.

Technical analysis: February live cattle futures gapped lower on the open but moved above last week's high of $129.70 and posted a bullish reversal and a high-range close. Followthrough buying tomorrow and a move above the Nov. 1 high of $130.25 would make bulls' next target the October high of $131.77 1/2. Support lies at last week's low of $128.15.


Feeder cattle

Price action: Feeder cattle futures favored a slightly firmer tone on the close, although prices were narrowly mixed.

Fundamental analysis: As live cattle futures firmed, feeder cattle came off their daily lows. Choppy price action in feeder cattle futures, however, can be attributed to the volatile day in the corn market. Late-session strength in the corn market limited buying in feeder cattle.

Technical analysis: January feeder cattle futures gapped slightly lower on the open and filled the gap, but couldn't muster enough momentum to move above yesterday's high of $146.30, which is initial resistance. Contract-low support lies at $142.37 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.

Feed needs: Carry all corn-for-feed and soybean meal risk in the cash market for now.

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