Livestock Analysis (VIP) -- November 5, 2012

November 5, 2012 08:30 AM
 

Hogs

Price action: Lean hog futures softened in late trade to end 75 cents to $1.65 lower, which was near session lows.

Fundamental analysis: Lean hog futures started the day mixed and losses were tempered throughout the morning as traders waited on a clear tone from the cash market. Losses were also limited early on for December hogs by the sizable discount the contract holds to the cash index. But steady to $1 lower cash hog bids amid plentiful supplies lead traders to believe more of the same will continue this week for the cash market, which resulted in stepped-up pressure on futures into the close.

Traders will be keeping a close eye on the pork cutout market this week given concerns about a slowdown in meat demand on the East Coast as the region focuses on rebuilding following last week's massive storm.

Technical analysis: December lean hog futures posted a big downside day of trade on the daily chart to suggest a near-term high has been posted. Followthrough pressure tomorrow would have bears targeting the bottom of the early October gap at $75.32 1/2, followed by the late-September low of $73.50. Resistance stands at last week's high of $79.40 and extends to the October high of $79.77 1/2.

Hedgers: Carry all risk in the cash market for now.

Feed needs: 50% of remaining 4th-qtr. protein needs are covered in long Dec. meal futures at $487.10 and 25% of expected 1st-qtr. needs are covered in long March meal futures at $468.50. Carry all corn-for-feed risk in the cash market for now.

 

 

Live cattle

Price action: Live cattle futures closed 15 to 35 cents lower in all but some of the far-deferred contracts, which was in the lower half of today's range.

Fundamental analysis: Trade was very cautious in the cattle market today as traders await Tuesday's presidential election results and wait to see what impact the East Coast recovery efforts from Sandy have on beef demand. Given that those uncertainties will be present again tomorrow, it's likely more cautious trade will be seen.

Initial cash cattle bids and asking prices are not yet established, but early expectations are for steady to weaker prices compared with last week's $126 to $127 trade. The weaker cash expectations will also limit buying in futures, although December live cattle are already at a discount to the bottom end of last week's cash range.

Technical analysis: The October low at $124.35 is key near-term support for December live cattle, followed by the September low at $123.95. From there, support is layered to the April low at $122.40.

 

Feeder cattle

Price action: Feeder cattle futures closed narrowly mixed with the November contract steady, January futures 10 cents higher and deferred months slightly lower.

Fundamental analysis: Feeder cattle futures were under pressure for much of the session amid a lack of buying interest in live cattle. But late weakness in corn helped modestly firm up nearby contracts.

Technical analysis: January feeder cattle futures are trading at the bottom of the extended, sideways trading range. Support is at $144.45 and then the contract low at $142.37 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: 50% of remaining 4th-qtr. protein needs are covered in long Dec. meal futures at $487.10 and 25% of expected 1st-qtr. needs are covered in long March meal futures at $468.50. Carry all corn-for-feed risk in the cash market for now.

 

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