Livestock Analysis (VIP) -- April 29, 2013

April 29, 2013 09:24 AM


Price action: Lean hog futures opened higher but softened through the day. May through August futures ended 5 to 27 1/2 cents lower, with deferred futures narrowly mixed.

Fundamental analysis: Early support came from expectations for higher cash hog bids, but futures quickly softened as traders worked to narrow the premium nearbys hold to the cash index. The cash hog market was 50 cents to $1 higher today and more of the same is expected tomorrow as packers are in need of additional supplies.

May lean hog futures ended the day at nearly a $7 premium to the cash index, which opens the door for followthrough pressure. Traders' focus tomorrow will be on closing out their books for the month.

Technical analysis: June lean hog futures posted a monthly high before slipping into the close. Today's high of $93.07 1/2 is initial resistance. To do technical chart damage, the contract would have to return below support at the April low of $88.22 1/2.

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 favored the upside in choppy trade for most of today's session and the market ended mixed with spring- and summer-month contracts 5 to 20 cents lower and deferred months steady to 30 cents higher.

Fundamental analysis: Live cattle futures were initially supported by higher cash cattle prices Friday, but this faded as the day progressed and the market grew concerned about the strong rally in the corn market. Plus, while beef demand concerns have eased, they have not been eliminated as movement has slowed at higher prices.

Showlist estimates are down throughout the Plains this week. Therefore if boxed beef prices continue to strengthen, this would point to another week of higher cash cattle trade. June live cattle futures are at nearly a $5.50 discount to last week's $128 cash trade.

Technical analysis: June live cattle futures matched but respected support at Friday's low of $122.50, which is also psychologically significant, after which support stands at last week's low of $120.35. Before softening and settling low-range the contract hit a new monthly high of $123.25 today. This is near-term resistance.


Feeder cattle

Price action: Feeder cattle futures faced pressure throughout the day and ended $1.22 1/2 to $1.42 1/2 lower.

Fundamental analysis: A sharply higher to limit-up day in the corn market weighed heavily on feeder cattle futures. Strength last week in the feeder cattle market added incentive for traders to take some profits out of the market today.

Technical analysis: May feeder cattle futures gapped lower on the open but respected psychological support at the $140.00 mark. Below this level, support stands at the contract low of $138.25. Last Friday's high of $142.25 remains near-term resistance.

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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