Livestock Analysis (VIP) -- April 2, 2013

April 2, 2013 09:54 AM
 

Hogs

Price action: April and May lean hog futures ended slightly lower, while the other contract months were mostly slightly firmer.

Fundamental analysis: April lean hog futures gapped higher on the open amid support from steady to firmer cash hog bids, but the contract ultimately faced pressure from the $5-plus premium it holds to the cash index with less than two weeks until expiration. For traders to push the lead-month contract higher, they must be convinced the cash market will continue to strengthen through the end of next week.

Deferred lean hog futures favored the upside amid hopes demand for pork will improve. While the product market is struggling to put in low, pork has a competitive advantage over beef; therefore, traders feel retailers may be more willing to feature pork this spring.

Technical analysis: June lean hog futures are showing a classic "V" bottom on the daily chart, suggesting a low in in place. Bulls' next hurdle is a 38% retracement of the price plunge from the December high to the March low around $92.73. A close above that level would clear the way for an extended price recovery.

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

Feed needs: Profits have been claimed on 1st-qtr. feed coverage that was held in March corn and meal futures. 25% of 2nd-qtr. corn needs are covered in long July corn futures at $6.78 3/4 and 25% of 2nd-qtr. protein needs are covered in long July soymeal futures at $388.00.

 

 

Live cattle

Price action: Live cattle futures got off to a firmer start, but futures softened throughout the day and ended low-range with losses of 95 cents to $1.32 1/2. Nearby contracts led today's price decline.

Fundamental analysis: Traders took advantage of dollar strength and the recent rally in the cattle market by booking profits today. While supply concerns and a more favorable feed situation sparked the rally, the boxed beef market has not yet shown definitive signs a seasonal low is in place. Choice and Select cuts both posted strong gains this morning, but movement was again light. Considering heavier showlist estimates this week, prices and movement need to improve to get packers to pay up for supplies after raising bids $3 to $4 last week.

Technical analysis: June live cattle futures closed last Thursday's gap, opening downside risk to the March low of $120.47 1/2. Resistance is at yesterday's high of $124.50.

 

Feeder cattle

Price action: Feeder cattle futures finished near the top of their daily trading range with losses of 57 1/2 to 95 cents.

Fundamental analysis: Feeder cattle futures have recently enjoyed a solid upside rally. Today, traders took a step back and booked some profits. Strength in the U.S. dollar index, choppy corn prices and spillover from live cattle was also encouraging to that end. But the market did no technical chart damage and a near-term low appears to be intact.

Technical analysis: May feeder cattle futures posted an inside day of trade, leaving near-term support at the top of yesterday's upside gap at $146.00 and resistance at the March high of $149.02 1/2.

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: Profits have been claimed on 1st-qtr. feed coverage that was held in March corn and meal futures. 25% of 2nd-qtr. corn needs are covered in long July corn futures at $6.78 3/4 and 25% of 2nd-qtr. protein needs are covered in long July soymeal futures at $388.00.

 

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