Livestock Futures Commentary
Live Cattle (April)
April live cattle tried to stage a relief rally early yesterday morning but failed miserably to hold a flame. Futures continued lower into the close, making new lows for the move and coming within arm’s length of the contract lows from September. Outside markets are taking it on the chin again in the overnight session which has raised serious concerns about future demand.
Bottom Line: As mentioned in our previous reports, the volatility creates an irrational trade (not just in cattle; look at stocks, gasoline, silver, etc) which makes finding short term technical levels a fool’s errand. The chart is still ugly as sin and it looks as though we will test those contract lows from September, 109.375. If we got another woosh lower, we would look out at the deferred futures contracts for a potential longer-term buy. The RSI (relative strength index) is at 22.65, this compares to the 21.05 we saw in August, after the TYSON Plant fire.
Feeder Cattle (March)
March feeder cattle tried to rally yesterday but failed to hold those gains which should raise a caution flag for those trying to pick a bottom. If the bulls continue to fail to hold ground above our pivot pocket, 133.25-134.20, we could see more downward pressure. There is minor support near 130, but not a lot of significant support until the contract lows from September, 126.05.
Bottom Line: For clients with a little higher risk appetite we tried lifting hedges yesterday, but the inability to hold the rally had us putting them back on before the close. The outside market volatility has shaken up money flow in commodities and will inevitably spill into volatility for markets such as cattle.
Lean Hogs (April)
April lean hogs have done a good job holding their own this week, all things considered. The market finished in positive territory yesterday, but the continued pressure in the outside markets may be too big of a hurdle for hogs to avoid if it continues.
Bottom Line: All in all, we thought April hogs held relatively well to start the week, but the bull camp still has their work cut out for them. We think the market can stabilize near term but wouldn’t be expecting a slingshot recovery in the near term.
Resistance: 67.95-68.675***, 72.00-73.075****
Support: 63.15-63.60***, 61.00****