Livestock Analysis (VIP) -- November 20, 2012

November 20, 2012 08:49 AM


Price action: Lean hog futures were mixed in early trade, but the market firmed as the day advanced to end at or near session highs with gains of 20 to 55 cents.

Fundamental analysis: Lean hog futures saw some light profit-taking encouraged by dollar strength and strong gains yesterday, but this soon gave way to light bargain buying as traders expect pork demand to improve as retailers stock up for the Christmas season and for supplies to tighten early in 2013. Also, cash hog bids turned mixed as some packers worked to secure additional late-week supplies.

Gains were limited by plentiful hog and pork supplies and the fact that December futures are at nearly a $3 premium to the cash hog index.

Technical analysis: December lean hogs matched yesterday's high of $81.90 today, marking it as strong resistance. A move through this price would open upside potential to the July high of $82.25. Support is layered from the bottom of Monday's upside gap at $80.60 to last week's low of $79.75.

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 closed 27 1/2 to 60 cents higher and near session highs.

Fundamental analysis: Live cattle futures were supported fundamentally by strength in the product market. Boxed beef prices were firmer this morning and movement was relatively active following a solid start to the week Monday. Combined with lighter showlist numbers this week, cash cattle opinions are on the upswing, although it doesn't appear active cash cattle trade will be seen until Friday.

Packers have yet to establish bids in the Plains, suggesting they are in no hurry to buy cattle. But that could change quickly given the Thanksgiving holiday, especially if plants are in need of supplies.

Technical analysis: December live cattle futures remain confined within the short-term boundaries from the Nov. 7 low of $124.55 to the October high at $128 32 1/2, but have moved into the upper part of that range.


Feeder cattle

Price action: Feeder cattle futures settled with slight gains and in the middle of today's range.

Fundamental analysis: Strength in live cattle and in the corn market pulled feeder cattle in different directions today. As a result, price action was choppy. Also, traders didn't want to add new positions on either side of the market with the Thanksgiving holiday ahead.

Technical analysis: January feeder cattle futures posted an inside day on the daily chart. Yesterday's high at $146.52 1/2 is initial resistance, with support at last week's double-bottom at $144.37 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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