Livestock Analysis (VIP) -- November 26, 2013

November 26, 2013 09:02 AM
 

Hogs

Price action: Lean hog futures faced light pressure this morning, but the market later firmed to end 2 1/2 to 60 cents higher in most contracts, which was at or near session highs.

Fundamental analysis: Mostly steady cash hog bids and a surge in pork movement this morning gave bulls an edge as traders readied positions ahead of the Thanksgiving holiday. While supplies are expanding at a rapid clip, strong packer profit margins are giving them incentive to keep kill lines full.

But in light of ample supplies and the wide premium futures hold to the cash hog index, near-term upside potential for the market is likely limited to short-covering.

Technical analysis: December lean hogs finished mid-range and near opening levels after a failed test of support at last week's low of $85.10 this morning. The next major level of chart support is the June high of $83.70. The market must close the Nov. 13 downside gap at $87.07 1/2 to open up significant upside potential.

Hedgers: 100% of expected 4th-qtr. production is hedged in Dec. lean hog futures at an average price of $83.74; 50% of 1st-qtr. marketings are hedged in Feb. lean hog futures at $89.70.

Feed needs: 25% of 4th-qtr. protein needs are covered in long Dec. meal futures at $422.20 and 25% of 1st-qtr. needs are covered in long March meal futures at $410.80.

 

 

Live cattle

Price action: Live cattle futures closed 67 1/2 cents to $1.10 higher through the October 2014 contract, which was high-range, but off session highs.

Fundamental analysis: Traders covered short positions in live cattle futures today amid ideas the downside has been overdone on the corrective pullback. There are also building hopes for steady cash cattle prices in the Plains this week. While packers are working with negative margins, there is a sense plants don't want to be caught short on slaughter supplies coming out of Thanksgiving.

Boxed beef prices were mixed this morning with Choice cuts 13 cents lower and Select 43 cents higher on movement of 100 loads. With Choice boxed beef back above $200, traders are keeping a close watch on how much product retailers purchase.

Technical analysis: After five days of consolidating, December live cattle filled the Nov. 19 gap at $131.80, giving an initial hint that a short-term low could be in the works. Bulls' next upside target is the Nov. 15 high at $133.50, while key near-term support is at last week's low at $130.65.

 

Feeder cattle

Price action: Feeder cattle closed $1.20 to $1.57 1/2 higher through the August contract today, which was on or near session highs.

Fundamental analysis: The combination of strength in live cattle and weakness in corn supported feeder cattle futures today. Traders also erased the discount the lead-month contract held to the cash index.

Technical analysis: January feeder cattle futures filled the Nov. 19 chart gap at $164.27 1/2, which is a sign the contract is working on a short-term low. This month's double-top at $166.00 is bulls' next objective. Key near-term support lies at last week's low of $162.05.

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: 25% of 4th-qtr. protein needs are covered in long Dec. meal futures at $422.20 and 25% of 1st-qtr. needs are covered in long March meal futures at $410.80.

 

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