Livestock Analysis (VIP) -- October 30, 2012

October 30, 2012 10:02 AM
 

Hogs

Price action: Lean hog futures closed 30 cents to $1 higher, which was just off session highs in most contracts.

Fundamental analysis: Ideas Monday's losses were overdone supported a short-covering rally in lean hog futures today. But buying interest was limited amid pressure on the cash hog market and concerns pork demand will be hurt by Superstorm Sandy.

Cash hog bids were steady to $1 lower on limited packer demand as market-ready supplies are plentiful. Hog movement was slowed in far eastern locations by impacts from Sandy. Cash sources are uncertain how long it will be until impacted operations are running fully again.

Technical analysis: Monday's reaction lows are key near-term support. That support lies at $77.55 for December lean hog futures and $83.10 for February lean hogs. Bulls' initial upside objective is filling Monday's chart gap at $78.30 in the December contract and $83.95 in the February contract.

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 were firmer throughout the day and ended 35 to 92 1/2 cents higher, which was near session highs.

Fundamental analysis: Following yesterday's choppy day of trade, live cattle were stronger today on help from weakness in the U.S. dollar index. Strength in the boxed beef market this morning also calmed concerns the massive East Coast storm will have a dramatic impact on beef demand.

In a somewhat surprising move, cash cattle trade began late this morning with steady trade at $127 reported in Texas, while Kansas feedlots moved cattle at $126. Trade was not active, as most feedlots say they are waiting on packers to raise bids. But the steady to lower cash trade still helped to firm futures as nearby contracts are trading at a slight discount to the cash market.

Technical analysis: December live cattle posted an upside day of trade on the daily chart but the contract needs to return above the October high of $128.32 1/2 to reopen upside potential to the September high of $131.15. Support begins at yesterday's low of $124.60 and extends to the September low of $123.95.

 

Feeder cattle

Price action: Feeder cattle futures ended $1.12 1/2 to $2.02 1/2 higher, which was near session highs.

Fundamental analysis: Futures saw spillover from live cattle as there was little other news today. It was somewhat impressive to see feeder cattle remain strong in light of firmness in the corn market.

Technical analysis: January feeder cattle futures gapped higher on the open, dropped to fill the gap, but returned higher and extended initial gains. Initial resistance stands at the October high of $150.80 and extends to the September high of $151.40. Support lies at yesterday's low of $145.95 and extends to the July low of $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: Risk is covered in the cash market for now.

 

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