Livestock Analysis (VIP) -- November 8, 2012

November 8, 2012 08:55 AM
 

 

Hogs

Price action: Lean hog futures hit multi-month highs on light followthrough buying today, but most contracts settled off their highs with gains ranging from 5 to 27 1/2 cents.

Fundamental analysis: After strong gains yesterday, interest toward either side of the market was relatively subdued today. While packers are enjoying strong cutting margins thanks to gains in the pork cutout market and a cash hog market that has trended steady to lower, traders are uncertain how pork demand will fare as retailers shift to featuring turkey for the holiday.

The December contract is now at a $2.15 discount to the cash hog index, which was also supportive. But plentiful supplies make traders comfortable with the discount structure to the cash market.

Technical analysis: February lean hog futures traded through resistance at the October high of $86.05 and stopped a nickel short of the July high of $86.20, but the contract was unable to find sustained buying interest at these levels and settled even with support at $86.00. Next support doesn't come until the Oct. 3 high of $83.35.

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 were choppy for much of the day, but firmed late to end mostly 12 1/2 to 50 cents higher and near session highs.

Fundamental analysis: Neither bulls nor bears were eager to aggressively add positions today as traders wait on cash cattle trade to develop. Mild support came late in the session after packers raised cash cattle bids to $125 in the Plains. Still, traders are anticipating steady-at-best cash cattle prices as showlist numbers are up from week-ago and packers are working with highly negative margins.

Technical analysis: December live cattle posted an inside day up. Initial support is at Wednesday's low of $124.55, with stronger support at the September low of $123.95. Downtrending resistance from the October high intersects at $125.52 Friday. The stronger downtrend drawn off the September and October highs intersects at $126.54 1/2 tomorrow.

 

Feeder cattle

Price action: Feeder cattle futures strengthened late to end 22 1/2 to 37 1/2 cents higher and near session highs.

Fundamental analysis: Feeder cattle futures were supported by short-covering today following recent price pressure. Most of the incentive to cover short positions came from a firming tone in live cattle late in the session. Choppy action in corn failed to provide much price direction for feeder cattle today.

Technical analysis: January feeder cattle futures remain at the bottom of the multi-month,sideways range. Support at the bottom of the range is at $144.45, with contract-low support 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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