February 8, 2008

CME Livestock Outlook: Live cattle mostly up, hogs mixed
 

 

Analysts and brokers called the Chicago Mercantile Exchange live cattle open Wednesday (February 7) mostly firm on follow-through front-month buying and brisk wholesale boxed beef sales that could underpin this week's cash prices.

The US Department of Agriculture's Tuesday evening boxed beef wire showed choice cuts rose US$2.05 per hundredweight and select items increased US$1.39.

Packer bids for fed cattle are unquoted while steady to firm asking prices are expected in part because of this week's smaller show lists.

No deliveries were posted by CME overnight against spot-February that is scheduled to expire on Feb. 29.

Brokers believe back-month live cattle could again make new contract highs due to overnight-Chicago Board of Trade corn advances.

However, caution before this week's cash results and pre-expiration spot-month liquidation may limit February's upside potential, an analyst said. Also, he said, February and April are ready to test key technical support levels.

February live cattle's 91.30-cent and April's 94.60-cent 20-day moving averages are major support areas.

Traders are tracking a winter storm moving through parts of the Midwest to see if it will impact cattle production or create problems transporting supplies.

Brokers called feeder cattle mostly weaker on potential profit taking by longs and electronic-CBOT feedgrain's upswing that could overtake possible follow-through buying.

March feeder's 104.72-cent 40-day moving average is a support level.

April's 110.37-cent 100-day moving average serves is a resistance target. The contract has a downside chart gap to fill between Tuesday's 109.00-cent low and Monday's 108.80-cent high.

Analysts and brokers expect CME lean hogs to open mixed on divergent fundamental factors, bearish technical issues and corn gains that could prop up deep-hog months.

Market participants could weigh Tuesday's pork cutout relapse against higher cash hog price calls that are aided by a wintry mix sliding across the middle part of the US, said brokers.

Spot-February could also come under liquidation pressure ahead of its Feb. 14 expiration date, a broker said.
 

February and April's still technically overbought chart conditions, and their premiums to CME's hog index, threaten possible front-month advances, the broker said.
 

Meanwhile, CBOT corn's rise in overnight trading could again motivate back-month speculative hog longs, a trader said.

April lean hog's 66.24-cent 100-day moving average is a major point of resistance.

Floor-trade lean hogs posted its fifth straight open interest record on Tuesday at 229,715 that succeeded Monday's 228,110 record.

An analyst called pork bellies mixed with a lower undertone on two deliveries late Tuesday, spot-February selling in advance of its Feb. 26 expiration and March's overbought chart issue.

What's more, traders may have a bearish reaction to CME's weekly belly storage numbers on Tuesday, the analyst said. The data's in-movement and inventory results exceeded last year's amounts.

CME reported 2.443 million pounds of bellies were moved into exchange-approved warehouses last week, compared with 405,000 pounds stored last year. On-hand stocks for last week were at 49.0 million pounds versus 32.0 million a year ago during the same period.
 

"However, it's hard to tell just how bearish Tuesday's storage numbers might be given recent futures' losses and steady fresh belly quotes late yesterday (Tuesday)," the analyst said.