Livestock Analysis (VIP) -- October 29, 2012

October 29, 2012 09:43 AM


Price action: December and February lean hog futures gapped lower on the open and ended $1.10 to $1.20 lower, respectively. The rest of the market ended 45 to 77 1/2 cents lower.

Fundamental analysis: Lean hog futures were pressured by concerns Hurricane Sandy will disrupt meat demand along the East Coast, as well as by some plants being closed due to travel disruptions. At least two packing plants will be closed again tomorrow and others are facing delayed shipments which raises concerns about lots backing up. The cash hog market was steady to $1.50 lower today amid weaker demand for cash hogs.

Additional pressure came on negative outside markets. Strength in the U.S. dollar index triggered widespread selling in the commodity sector.

Technical analysis: February lean hog futures gapped below uptrending support drawn off September reaction lows. Followthrough pressure tomorrow would signal a near-term high has been posted. Hedgers should stay in touch for potential hedge advice.

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: Live cattle futures settled high-range and narrowly mixed on the day.

Fundamental analysis: Live cattle futures opened under pressure on concerns Hurricane Sandy will disrupt beef exports and reduce East Coast meat demand. But the market improved after Choice boxed beef values improved 79 cents this morning following heavy declines Friday. Select cuts softened another 43 cents, however.

Showlist estimates are sharply lower in Nebraska but near-steady to up slightly from week-ago in Kansas and Texas. Traders will watch the boxed beef market closely as they form cash cattle expectations, as traders evaluate whether the market has put in a short-term top.

Technical analysis: December live cattle futures settled near opening levels and Friday's close, signaling uncertainty about near-term price direction. Today's low of $124.60 is near-term support. Resistance stands at the October high of $128.32 1/2.

Feeder cattle

Price action: Feeder cattle futures saw two-sided trade today and rebounded late to finish near session highs. November and January futures finished 60 and 40 cents higher, respectively. Deferred months were steady to lower.

Fundamental analysis: Action in feeder cattle futures was choppy today due to light trading volume associated with Hurricane Sandy. Buying interest improved late in the day thanks to weakness in the corn market and improvement in live cattle.

Technical analysis: January feeder cattle futures forged a new monthly low of $145.95 before settling high range with gains for the day. This is new support. But the high-range close will give bulls the near-term advantage. Their initial target is the psychological $150.00 level, followed by the October high of $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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