Livestock Analysis (VIP) -- November 6, 2012

November 6, 2012 09:22 AM
 

Hogs

Price action: Lean hog futures settled 47 1/2 to 65 cents higher in the December through April contracts. Far-deferred futures finished mixed with a slight downside bias.

Fundamental analysis: Hog futures were pressured by followthrough selling early after a poor close Monday. But the big discount December hogs hold to the cash index and ideas recent losses were overdone triggered light short-covering in the first three listed contracts.

Cash hog bids were steady at most locations today, although scattered weaker bids were noted. Packer demand for cash hogs is likely to be limited moving forward as pork plants are bought ahead on slaughter needs and market-ready supplies are plentiful. That's largely why traders are comfortable with December hog futures trading at a discount to the cash market.

Technical analysis: Today's low at $82.65 is key near-term support for February lean hog futures, especially with a 38% retracement of the rally from the September low to the October high just below that level. Violation of today's low would open risk to the $81.50 level, which has been a key pivotal mark and also represents a 50% retracement of the fall rally.

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 saw a choppy start but nearby contracts firmed ahead of midday and by the close, futures were mostly 20 to 40 cents higher.

Fundamental analysis: Early weakness was viewed as a buying opportunity, as traders worked to cover short positions given the discount December cattle hold to last week's $126 to $127 cash cattle trade. Additional buying was encouraged by positive outside markets, with afternoon strength coming on improvement in the boxed beef market this morning.

Most traders are expected steady to lower cash cattle trade this week as showlist numbers are up from week-ago and packer margins are deep in the black. But traders don't expect cash trade to occur until late in the week.

Technical analysis: December live cattle futures posted an inside day up on the daily chart. Initial resistance stands at yesterday's high of $125.90 and extends to last week's high of $126.60. Tough resistance is at the October high of $128.32 1/2. Support begins at the October low of $124.60 and extends to the September low of $123.95.

 

Feeder cattle

Price action: Feeder cattle futures posted a choppy day of trade, but didn't stray too far from unchanged and ended steady to 5 cents lower.

Fundamental analysis: Feeder cattle got support from tight supplies and spillover from live cattle as well as positive outside markets at times today, but strength in the corn market limited buying interest. November futures are trading at a slight premium to the cash index.

Technical analysis: January feeder cattle futures traded in the upper quarter of yesterday's trading range, but need to remain above support at yesterday's low of $145.85 to avoid triggering sell stops as this is at the lower end of the choppy, 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: 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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