Livestock Analysis (VIP) -- October 7, 2013

October 7, 2013 09:55 AM


Price action: Lean hog futures closed slightly higher and near their highs of the day except for the lead-month October contract, which closed 25 cents lower. December through July 2014 futures closed 22 1/2 to 60 cents higher.

Fundamental outlook: Hog futures edged higher in thin trade today supported by mostly steady cash hog prices at interior markets. The lack of daily slaughter, cash and wholesale price data from the government has sent traders to the sidelines resulting in thin trading. What data was available tended to be supportive. It is believed packers are cutting in the black and runs, although somewhat higher, remain restrained versus seasonal trends.

Technical outlook: The chart picture remains positive for hog futures. December futures today closed the gap area left Sept. 30, following the release of the bearishly viewed Hogs & Pigs Report. Resistance extends from today's high at $88.20 to the contract high at $88.90. Support is at $85.85.

Hedgers: 50% of expected 4th-qtr. production is hedged in Dec. lean hog futures at an average price of $82.12 1/2.

Feed needs: 25% of 4th-qtr. protein needs are covered in long Dec. meal futures at $422.20 and 25% of 1st-qtr. needs are covered in long March meal futures at $410.80.



Live cattle

Price action: Live cattle futures saw choppy trade at times today, but bears had the advantage into the close. Futures ended 12 1/2 to 35 cents lower for the day.

Fundamental outlook: Traders in the live cattle market worked to narrow the premium futures hold to last week's mostly steady cash cattle trade at $126. But a lack of USDA data makes some unwilling to add new positions. Showlist estimates are tighter everywhere except Nebraska this week, which could give feedlots an advantage in cash negotiations.

Traders are lacking daily beef market updates from USDA, which has traders turning to private sources. Urner Barry reports Choice and Select boxed beef cuts firmed a penny this morning.

Technical outlook: December live cattle traded within the upper half of Friday's trading range today, keeping the market well within its uptrending pattern. Friday's high of $132.60 is resistance. To find support, the contract must retreat all the way to $130.00.

Feeder cattle

Price action: Feeder cattle futures saw two-sided trade today and most contracts ended high-range with October through January feeders 17 1/2 to 47 1/2 cents lower and farther-deferred months slightly higher.

Fundamental outlook: Nearby feeder cattle futures faced light profit-taking pressure today after the market's strong performance last week. Strength in the corn market was also encouraging to that end. But selling interest also remains limited as the charts remain fully bullish for feeder cattle futures and calf supplies are expected to continue to tighten, eventually propelling the market to a 10-year cycle high in 2014.

Technical outlook: Resistance for the November feeder cattle contract stands at last week's contract high of $166.50. The Sept. 24 gap from $162.45 to $163.00 marks support.

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, but feeder cattle buyers should stay in touch to establish long coverage.

Feed needs: 25% of 4th-qtr. protein needs are covered in long Dec. meal futures at $422.20 and 25% of 1st-qtr. needs are covered in long March meal futures at $410.80.


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