CME Livestock Outlook: Fundamentals Seen Boosting Hogs
11/25/2009 08:28AM
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CHICAGO (Dow Jones)--Bullish fundamentals and spillover from modest hog buying on the Chicago Mercantile Exchange Tuesday could provide initial market support on Wednesday, said analysts and brokers.
The CME livestock market will observe normal trading hours on the eve of the Thanksgiving Day holiday.
The U.S. Department of Agriculture's Tuesday evening pork cutout price jumped $1.07 per hundredweight. And cash hog prices are called steady to firm for Wednesday.
However, likely positioning before the holiday may include profit-taking by those who were recently long the market. Spot-December and nearby-February contracts are overbought based on their Relative Strength Index charts.
And, recent cash hog price increases are wearing on pork packer profit margins.
The Dow Jones pork packer margin index for Tuesday's operations was plus $1.18, compared with plus $3.34 Monday.
USDA's Iowa/Southern Minnesota weekly average hog weight data for last week show hogs in the region at 270.5 pounds, compared with 270.4 the week before and 268.3 a year ago.
Week-over-week hog weights in Iowa suggest producers there are current in marketing their animals, which some might view as "friendly" for the market," a CME hog trader said.
December's 58.25-cent Nov. 3 high is a price support level. The contract has a chart gap between Monday's 58.05 low and Friday's 57.85 high.
December's 59.00 July 16 high is a level of price resistance.
February's 65.00 Friday high serves as an area of price support. The contract's 66.50 June 11 low is a price resistance area.
Pork bellies could open mixed featuring potential buying follow-through from Tuesday's futures advances versus possible profit-taking and the chance of negative reaction to that evening's CME weekly belly storage results.
CME on Tuesday reported 2.452 million pounds of bellies were moved into exchange-approved warehouses last week, compared with 2.169 million stored last year. On-hand stocks for last week were quoted at 26.3 million pounds versus 18.4 million a year ago.
More bellies were put into warehouses last week than a year ago and larger inventories than last year might be bearish for futures, a belly market analyst said. But, it is hard to tell how futures will respond because there may be fewer traders in the pit because of the Thanksgiving holiday, he said.
February's 86.00-cent Nov. 17 low is a price support floor. The contract's 86.89 10-day and 87.21 20-day moving averages are chart resistance thresholds.
-By Theopolis Waters, Dow Jones Newswires; 312-559-4965; theopolis.waters@dowjones.com