Livestock Analysis (VIP) -- October 25, 2012

October 25, 2012 09:56 AM
 

Hogs

Price action: Lean hog futures gapped lower on the open, but finished high-range with losses of 7 1/2 to 40 cents.

Fundamental analysis: Lean hog futures continue to correct from what appears to be a near-term top. Encouraging this was the decline in the pork cutout market this week, which has pulled packer profit margins into the red. This, in turn, is keeping the cash hog market steady to lower. The market will likely remain in a sideways to lower posture over the near-term as supplies will continue to build into year-end while the seasonal trend is for a lull in demand at this time.

Technical analysis: December lean hogs traded through but settled above uptrending support drawn off reaction lows from the September low. A close below this line, which intersects around $78.00 tomorrow, would confirm a short-term top is in place.

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

Feed needs: Risk is covered in the cash market for now.

 

 

Live cattle

Price action: October live cattle futures closed 45 cents lower, while deferred months finished 95 cents to $1.42 1/2 lower. Futures ended in the lower half of today's range, although well off session lows.

Fundamental analysis: Strength in the boxed beef market has turned into a double-edged sword. While it has provided recent support to the market, traders are concerned consumers will balk when retailers try to pass record prices onto them. As a result, futures sold off today amid concerns the boxed beef market is near a short-term top and concerns beef demand could wane.

Cash cattle trade picked up in the Plains around $127, which is steady with the bulk of last week's trade. But the steady cash prices were disappointing. Given the strength in the boxed beef market, traders were hopeful of higher cash cattle trade.

Technical analysis: December live cattle futures posted a big downside day of trade to poke below the Oct. 15 correction low at $125.45. A close below that level would make the September low at $123.95 next support.

 

Feeder cattle

Price action: October feeder cattle futures closed 12 1/2 cents lower, while deferred months were 75 cents to $1.20 lower.

Fundamental analysis: Feeder cattle traders ignored price pressure in the corn market and instead focused on sharp declines in live cattle. With cattle traders concerned beef demand will wane amid higher prices, there are thoughts demand for feeder cattle will slow.

Technical analysis: January feeder cattle futures remain in the choppy, sideways trading range. The initial boundaries are at $146.12 1/2 and $150.80.

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: Risk is covered in the cash market for now.

 

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