Livestock Analysis (VIP) -- April 23, 2013

April 23, 2013 09:51 AM


Price action: Lean hog futures were firmer throughout the day, but slipped into the close to finish mid- to low-range with daily gains of 10 to 40 cents.

Fundamental analysis: Early support came from ideas demand for red meat will improve with next week's warmer temps that are forecast for much of country. This caused traders to discount yesterday's bearish Cold Storage Report that showed the second highest total ever for pork stocks at the end of March. However, the bearish stocks report limited the upside to corrective buying today.

Traders are also encouraged by a pick up in pork demand and firmer pork cutout values, which have improved packer profit margins. The cash hog market was mostly steady today, but some plants need additional hogs for later in the week, which could help to firm bids tomorrow.

Technical analysis: June lean hog futures gapped higher on the open to fill the previous day's gap lower, but then filled this morning's gap and posted a low-range close. Initial resistance stands at last week's high of $91.00 and extends to the April high of $92.70. Support begins at last week's low of $88.22 1/2 and extends 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 closed steady to 40 cents higher, though that was in the lower end of today's trading range.

Fundamental analysis: Mild short-covering was seen in the live cattle market today following Monday's losses. But buying interest was limited as traders maintain a cautious tone as they wait to form cash cattle opinions for the week. Also, demand concerns continue to hang over the market and are limiting buying interest.

Technical analysis: June live cattle futures continue to consolidate above the recent contract low while remaining in the downtrend from the winter highs. The contract must push through the downtrend and close above the last reaction high at $124.50 to indicate an extended price recovery is underway.

Feeder cattle

Price action: Feeder cattle futures finished sharply higher in all but the April contract, which expires Thursday.

Fundamental analysis: Sharp losses in the corn market and ideas the downside has been overdone fueled active short-covering in feeder cattle futures today. Futures finished well off session highs, however, as corrective buying eased late.

Technical analysis: May feeder cattle gapped higher to leave a one-day island-bottom on the daily chart. To confirm a low, the contract must push above the last reaction high at $147.70.

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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