Livestock Analysis (VIP) -- November 26, 2012

November 26, 2012 08:34 AM


Price action: Lean hog futures were firmer for much of the day, but faded late to finish steady to 40 cents lower through the June contract. Far-deferred futures ended steady to firmer.

Fundamental analysis: Lean hog futures were supported by steady to firmer cash hog bids through the morning. But the premium December lean hog futures hold to the cash index and ideas strength in the cash market will be short-lived triggered late-session profit-taking.

Cash hog bids were steady to $1 higher across the Midwest today as plants are short-bought on supplies for the week. While market-ready supplies are ample, packers are working with profitable margins, giving them incentive to ensure kill lines are full.

Technical analysis: December lean hog futures have posted consecutive closes above the July high of $82.25, making that level initial support. Stronger support is at the Nov. 15 low at $79.75 and the uptrend drawn off the September and November swing lows, which intersects around $78.78 Tuesday. To the upside, the April high at $83.50 is bulls' next target.

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 started the day mixed, but softened to end mostly 10 to 60 cents lower which was a mid- to low-range close.

Fundamental analysis: Price action was choppy but light profit-taking picked up this morning following last week's strong gains. Light cash cattle trade was reported at $128 in Texas this afternoon, which is steady with last week, and much earlier than expected. But cash sources say these feedlots wanted to take advantage of steady bids due to the disappointing start to the week in the boxed beef market.

Boxed beef prices were softer this morning on lackluster movement. If this trend continues, it will give packers the upper hand in cash negotiations, especially since this week's showlist is expected to be up slightly from last week and packers are working with negative margins.

Technical analysis: February live cattle filled Friday's gap area but returned to post a mid-range close. Initial resistance beings at last week's high of $132.90 and extends to the September high of $133.30. Support is at the October high of $131.77 1/2.


Feeder cattle

Price action: Feeder cattle futures ended 32 1/2 to 52 1/2 cents lower.

Fundamental analysis: Feeder cattle futures favored a weaker tone throughout the day as they say spillover from live cattle and from negative outside markets. Slight strength in the corn market also weighed on feeder cattle futures.

Technical analysis: January feeder cattle need to return above the $150.00 level to signal a near-term low has been posted. But it would take closes above the September high of $151.40 to lift futures out of the four-month-long consolidation range.

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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