Livestock Analysis (VIP) -- April 30, 2013

April 30, 2013 09:26 AM


Price action: Lean hog futures enjoyed gains for most of today's session and most contracts ended high-range with gains between 40 and 80 cents.

Fundamental analysis: Cash hog bids today were mostly 50 cents to $2 higher thanks to improved demand from processors and seasonally tightening supplies. Pork market action of late has given signs that retailers are featuring pork for grilling features. Also, the Chinese bird flu situation is eventually expected to result in increased pork demand from the country as it looks to replace the protein source of a culled poultry flock.

But buying enthusiasm was kept in check by a pullback in pork prices this morning and relatively lighter movement thus far this week. Also, nearby contracts remain at a lofty premium to the cash hog market and packers have seen profit margins decline this week.

Technical analysis: June lean hog futures posted an inside day of trade, leaving support at the April 18 spike high of $91.00 and resistance at yesterday's high of $93.07 1/2. A move through resistance would set bulls' next target at the top of the Feb. 14 downside gap at $94.05.

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: April live cattle expired 70 cents higher, while the other contracts finished 30 to 72 1/2 cents lower.

Fundamental analysis: Live cattle futures were higher for much of the morning, but the buying interest didn't last. While June live cattle will take over lead-month status at a big discount to last week's cash trade, there isn't an urgency to aggressively narrow the spread despite tightening feedlot supplies. That's a clear indication traders remain concerned about demand. Until those demand concerns are eased, the upside is limited to corrective buying.

Packers continue to raise boxed beef prices in an attempt to aid negative margins. But retailers are showing resistance to the higher beef prices, which is adding to demand concerns.

Technical analysis: June live cattle futures are signaling a potential short-term top on the daily chart following today's price action. Contract-low support is at $119.40.


Feeder cattle

Price action: Feeder cattle ended 77 1/2 to 97 1/2 cents lower, which was near daily lows.

Fundamental analysis: While corn futures ended lower today, concerns prices are headed higher short-term weighed on feeder cattle futures. Technical-based selling also pressured the market as futures were unable to find sustained buying interest above Monday's high.

Technical analysis: May feeder cattle futures posted a bearish reversal today, which points to a near-term test of contract-low support at $138.25. To the upside, last Friday's high at $142.25 is key 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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