Livestock Analysis (VIP) -- October 31, 2012

October 31, 2012 10:23 AM


Price action: Lean hog futures gapped higher on the open and extended gains, but this gave way to profit-taking ahead of the close. Futures settled well off their highs with gains of 10 to 60 cents through the May contract. Farther deferred months ended steady to 40 cents lower.

Fundamental analysis: With Superstorm Sandy at an end, eastern Corn Belt packing plants opened their doors again today and worked to fill needs for a large Saturday kill. Cash hog bids were mostly steady with a few lower bids as supplies continue to expand seasonally. But a slight decline in hog weights for Iowa and southern Minnesota last week indicates producers are current on marketings.

The market did face profit-taking late in the session, however, as outside markets turned less friendly and traders remain concerned that destruction on the East Coast will slow pork demand at a time when it typically slips a little anyway.

Technical analysis: December lean hogs traded up to Friday's spike high of $79.10, but the contract was unable to move through this level, keeping it as near-term resistance, followed by the October high of $79.77 1/2. Key support stands at Monday's low of $77.55.

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 expired 85 cents higher, while the other contracts closed narrowly mixed. Futures settled mid- to high-range for the day.

Fundamental analysis: Live cattle futures faced early profit-taking pressure as followthrough buying from a strong close Tuesday was lacking. But given the discount the December contract holds to the cash market and tightening market-ready supplies, selling interest was limited.

A few more cash cattle sales were reported in the Plains at $126 to $127, steady with trade on Tuesday. Active cash cattle trade has not been seen as most feedlots are hopeful of better cash bids from packers later this week, although some cash sources feel packer demand will stay limited amid negative margins and concerns about near-term East Coast beef demand.

Technical analysis: Key near-term boundaries for December live cattle are the September low at $123.95 and the October high at $128.32 1/2.


Feeder cattle

Price action: Feeder cattle futures finished 60 to 95 cents lower, although that was mostly near session highs.

Fundamental analysis: Strength in the corn market and a lack of solid buying interest in live cattle weighed on feeder cattle futures today. While tight calf supplies limit downside risk, the upside is capped by high feed prices.

Technical analysis: January feeder cattle remain pinned within the extended, sideways range from roughly $146.00 to $151.00.

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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