Livestock Analysis (VIP) -- April 25, 2013

April 25, 2013 10:01 AM



Price action: Lean hog futures improved as the day progressed and ended 30 to 82 1/2 cents higher through the October contract, while farther deferred months ended slightly lower.

Fundamental analysis: Lean hog futures benefited from strength in both the pork and the cash hog market. The pork market has recently firmed both in terms of prices and movement. The pork cutout value surged this morning and movement surged. The forecast for warmer temps has traders optimistic more such improvement is ahead.

This strength has given the cash market a lift as packer profit margins are solidly in the black and demand is on the rise while supplies are tightening. Flooding in the eastern Corn Belt has also contributed to near-term tightness in market-ready hog supplies.

Technical analysis: June lean hog futures posted another strong upside day of trade and appear headed for a challenge of the April high of $92.70. A close above that level would signal a seasonal low is in place. Support stands at the psychological $90.00 level.

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 finished 60 to 85 cents higher, which was a high-range close.

Fundamental analysis: Live cattle futures were boosted by forecasts calling for much warmer temps across the country, which could improve demand for beef as consumers fire up grills after an extended cold spell. Additional support came from bullish cash cattle hopes.

Packers raised cash cattle bids in Nebraska today, but there were no sales. There was also talk that some plants have bumped up Saturday kill plans. As a result, traders are anticipating firmer cash cattle prices compared with last week's mostly $126 trade.

Technical analysis: June live cattle futures must close above the April 1 high of $124.50 to encourage active chart-based buying. Until then, gains will be seen as corrective in nature.


Feeder cattle

Price action: Feeder cattle closed sharply higher in all but the lead-month April contract, which expired 27 1/2 cents higher today.

Fundamental analysis: Feeder cattle futures were able to work higher today despite strength in the corn market. Instead, traders focused on the broad-based rally in commodities. Given recent price pressure, traders covered short positions.

Technical analysis: After dropping to a new contract low Monday, April feeder cattle futures have firmed nearly $4, with today's action resulting in a bullish reversal. Followthrough buying tomorrow would confirm at least a temporary low. But the contract must push above the April 1 high of $147.70 to confirm a low.

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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