CME Livestock Outlook: Uneven Hogs, Cattle Indicators
11/09/2009 08:40AM
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CHICAGO (Dow Jones)--Analysts and brokers anticipate an uneven start Monday for Chicago Mercantile Exchange hogs.
Bearish market matters include potential carryover from CME lean hogs' losses last Friday and that evening's $1.03-per-hundredweight pork cutout price drop.
December and February premiums to CME's hog index are more negative market influences.
Buyer caution is possible as traders feel out early-week lean-hog direction. Retail demand for fresh meat could subside as grocers fill meat cases in preparation for Thanksgiving.
Spot-December could come under "Goldman roll" pressure.
The Goldman roll involves funds shifting some of their spot-December long positions into nearby-February. Monday is the second of five days for the current roll period that is tied to the S&P's GSCI.
Nonetheless, potential short-covering and steady-to-higher cash hog price calls could cushion futures' potential fall or land some months in positive trading territory. And, packers that have profitable margins might pay up for supplies if forced to do so.
The Dow Jones pork packer margin index for Friday's operations was plus $5.32, compared with plus $5.62 the previous day.
Meanwhile, the U.S. dollar's tumble and U.S. stock market advances in early action may motivate some back-month hog buyers.
December's 55.50-cents July 24 high serves as a price-support area. The contract's 55.09 20-day moving average is also an area of chart support.
December's 56.41 10-day moving average is a technical resistance level.
February's 62.65 Friday low is a level of price support. The contract has a chart gap between the 62.67 Oct. 29 low and 62.25 Oct. 28 high.
February's 63.13 10-day moving average is a resistance target.
Pork bellies could open mixed featuring follow buying after futures' climb last Friday versus potential profit-taking and late-Friday's steady to $5 per hundredweight lower fresh belly price quote.
February's 85.69-cents 20-day moving average is a support point. The contract's 86.50 Oct. 23 high is a price resistance mark.
Cattle Complex
CME live cattle's open could vary, based on brokers and analysts' expectations.
Selling from futures' setback Friday could spill over into Monday's session.
Cash cattle price uncertainty could become an issue given the approaching Thanksgiving Day holiday when grocers normally feature hams and poultry.
And, unprofitable beef packer profit margins and fading boxed beef prices are bearish market considerations.
Cash-basis cattle last week sold for mostly $87.50 per hundredweight, compared with the prior week's overall sales at primarily $87.
The U.S. Department of Agriculture's Friday evening boxed beef data showed choice cuts down another $0.55 per hundredweight, and select items were off $0.32.
The latest operating margin index for beef packers was minus $21.05 per head, compared with minus $22.10 the previous day, as calculated by HedgersEdge.com.
By the same token, Friday's futures pullback may have already built in potential lower cash prices for this week. Short-covering could minimize further board losses.
And, speculative bulls may be drawn to December and February oversold technical indicators.
The migration of longs out of December into February is likely because of the current "Goldman roll" phase.
Meanwhile, U.S. equities' run up and the U.S. dollar's pullback may entice deferred-month cattle longs.
December's 84.75-cents Oct. 1 low is a price support area. The contract's 85.25 Oct. 30 low is a price resistance obstacle.
February's 85.75 Oct. 15 low is a support floor. The contract's 86.38 40-day moving average is a resistance threshold.
Feeder cattle could open on both sides of the board.
Bearish market factors consist of Friday's futures declines that could carry over into Monday, feeder contracts' premiums to CME's feeder cattle index and overnight-Chicago Board of Trade corn's upswing.
However, potential short covering and possible live cattle support could emerge as bullish feeder cattle influences.
November's 94.00-cents Oct. 12 low is a price support level. The contract's 95.10 20-day and 95.20 10-day moving averages are chart resistance boundaries.
November has a chart gap between Friday's 95.30 high and Thursday's 95.60 low.
January's 95.92 10-day and 95.77 20-day moving averages are technical support floors. The contract's 96.40 40-day moving average is a resistance ceiling.
-By Theopolis Waters, Dow Jones Newswires; 312-559-4965; theopolis.waters@dowjones.com