Livestock Analysis (VIP) -- April 10, 2013

April 10, 2013 09:29 AM
 

Hogs

Price action: Lean hog futures spent much of the morning in positive territory, but the market softened after midday. April and May futures ended 50 cents and 25 cents higher, respectively, while deferred contracts posted losses of 10 to 55 cents.

Fundamental analysis: The April lean hog contract is trading in line with the cash hog index ahead of its expiration Friday. Strength in the cash market along with expectations spring grilling season will soon give the pork market a boost supported nearby contracts today. Wintry weather is also thought to be tightening near-term supplies.

But the rest of the market faced pressure from a disappointing update to USDA's balance sheet today. USDA raised its 2013 pork production forecast by 130 million lbs. from last month and lowered its export forecast by 160 million lbs. from March. This also resulted in a lower average cash hog price projection of $58 to $60 from USDA.

Technical analysis: June lean hogs traded through and settled below near-term support at last week's low of $89.55, turning that level into resistance and opening downside risk to the March low of $87.20.

Hedgers: Carry all risk in the cash market for now.

Feed needs: All feed coverage has been lifted. Carry all risk in the cash market for now.

 

 

Live cattle

Price action: Live cattle futures extended losses into the close to finish sharply lower and on or near session lows.

Fundamental analysis: Live cattle futures struggled to find buying interest through the morning amid cautious price action ahead of cash cattle trade. Selling pressure built this afternoon after cash cattle trade got started at $127 in Texas. That price was below expectations; traders had hoped for steady to firmer cash cattle prices this week. April live cattle futures continue to trade at a discount to the cash market, reflecting traders' bearish attitudes despite tightening supplies.

Demand concerns are the source of the bearish attitudes. USDA didn't help matter any when it lowered the beef export forecast to reflect slowed first-quarter shipments. Until demand concerns are eased, the upside is limited to corrective buying.

Technical analysis: June live cattle futures dropped to a new contract low and ended low-range, setting the contract up for additional price pressure Thursday.


Feeder
cattle

Price action: Feeder cattle finished with losses in excess of $2 and on or near session lows.

Fundamental analysis: Feeder cattle were pressured throughout the day, but selling interest built as live cattle sharply extended losses late and corn futures closed higher. With the fed cattle market struggling to find traction, there are also concerns with cash feeder cattle demand.

Technical analysis: May feeder cattle futures nearly filled the big March 28 chart gap today. The bottom of that gap at $142.15 is initial support. If that is violated, bears would target the contract low at $138.90.

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: All feed coverage has been lifted. Carry all risk in the cash market for now.

 

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