Livestock Analysis (VIP) -- November 29, 2012

November 29, 2012 08:57 AM


Price action: December through July futures ended 12 1/2 to 45 cents lower while farther deferred months were mostly slightly higher. This was a low-range close.

Fundamental analysis: Lean hog futures got off to a firmer start, but this gave way to profit-taking ahead of midday as outside markets turned less bullish as optimism faded regarding fiscal cliff talks. Light pressure also stemmed from the steep premium nearby futures hold to the cash hog index, which was most recently projected at $79.42.

But selling interest is limited to corrective profit-taking for now, as both the cash and product markets have firmed this week, signaling solid demand. Cash hog bids today were again steady to higher and the pork cutout market has gained $8.48 over the past five days.

Technical analysis: December lean hogs hit their highest levels since early March before reversing course and ultimately settling below yesterday's close. Followthrough selling would have bears eyeing the psychological and gap support area of $83.00. Today's high of $84.67 1/2 is near-term resistance. February lean hogs posted a bearish reversal today.

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 settled high-range with gains of 25 to 57 1/2 cents. Most contracts posted an inside day of trade.

Fundamental analysis: Active cash cattle trade has yet to get underway, but slight gains in futures today signal traders expect firmer cash prices compared with last week's mostly $128 trade. Supporting this expectation is improvement in the boxed beef market yesterday, gains in Choice boxed beef values this morning and tighter showlist numbers this week.

On the other hand, negative packer profit margins and ongoing uncertainty regarding fiscal cliff talks mean higher cash prices are by no means a "sure thing."

Technical analysis: December live cattle futures saw an inside day of trade, layering near-term support at last week's upside gap from $127.12 1/2 to $127.50. But today's high-range close gives bulls the near-term advantage. Their target is the November high of $129.12 1/2.


Feeder cattle

Price action: Most feeder cattle contracts settled high-range with gains of 25 to 67 1/2 cents.

Fundamental analysis: Feeder cattle futures firmed as the corn market softened today. Outside markets were also mildly encouraging of commodity buying, though the U.S. dollar index backed off its early losses and the stock market trimmed gains midway through today's session.

Technical analysis: Resistance for January feeder cattle futures stands at last week's double-top high of $147.90. Support remains at the double-bottom November low of $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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