Livestock Analysis (VIP) -- November 15, 2012

November 15, 2012 09:05 AM


Price action: Lean hog futures didn't stray too far from unchanged today and ended narrowly mixed. December closed 2 1/2 cents lower, and February was up 10 cents.

Fundamental analysis: Upside potential was limited by yesterday's sharp $2.55-drop in pork cutout values. But it came on a pickup in movement of 116.5 loads. Still, packers lowered bids at most locations today as they saw their profit margins decline and say supplies are plentiful. Early expectations are for steady to lower cash hog bids tomorrow.

The CME lean hog index is projected down 72 cents at $80.76 tomorrow. December hogs are trading at less than a dollar discount to the index, which is considered more in line for this time of year.

Technical analysis: February lean hog futures recovered after penetrating support at the October high of $86.05. Contract-high resistance stands at $87.27 1/2 with support at the November low of $82.65.

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 saw two-sided trade today, but most contracts settled high range with gains ranging from 17 1/2 to 60 cents.

Fundamental analysis: Cattle futures saw a relatively quiet day of trade as the market is hesitant to add long or short positions ahead of tomorrow's Cattle on Feed Report or the start of cash cattle trade. Expectations are that the report will reflect tightening supplies, but the market also anticipates weak near-term fundamentals will lead to lower cash cattle trade. Showlist estimates are up sharply this week and packers are cutting in the red. Plus, demand typically slows ahead of Thanksgiving. This has led to recent declines in boxed beef values.

Technical analysis: After posting a bullish reversal yesterday, February live cattle failed to find followthrough buying today. That suggests more choppy price action near-term.



Feeder cattle

Price action: November feeder cattle futures expired 20 cents firmer for the day at $143.40. Deferred months ended 25 to 37 1/2 cents firmer for the day, which was good for a high-range close.

Fundamental analysis: Feeder cattle futures saw choppy trade early today as the corn market saw similar mixed action. But as bears gained momentum in the corn pit, feeder cattle futures benefited from an increase in short-covering.

Technical analysis: January feeder cattle bounced off yesterday's low of $144.37 1/2, marking it as strong near-term support. Contract-low support stands at $142.37 1/2. Monday's high of $146.30 is near-term resistance.

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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