Livestock Analysis (VIP) -- April 9, 2013

April 9, 2013 09:43 AM



Price action: Lean hog futures closed 20 cents higher in the April contract, with May steady. Deferred futures ended 12 1/2 to 70 cents lower.

Fundamental analysis: Buying in nearby futures was limited by short-covering and positive outside markets, as well as help from tightening market-ready supplies. But concerns about pork demand limited buying as traders note the recent slowdown in export demand (see "Evening Report" for more).

April hogs were also supported by a firmer tone in the cash hog market, although packers warn strength will be limited as demand will wane given the fact margins are in the red. Early expectations are for mostly steady hog bids tomorrow.

Technical analysis: June lean hog futures extended losses around midday and posted a low-range close. Followthrough pressure tomorrow would have bears targeting the March low of $87.20. Resistance stands at last week's high of $92.70.

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 mixed and near the middle of today's trading range in most contracts.

Fundamental analysis: Price action was choppy today as traders wait on clearer indications of this week's cash cattle trade. While smaller showlist numbers suggest packers may raise cash cattle bids from week-ago in the Plains, ongoing concerns with beef demand are keeping nearby live cattle futures at a slight discount to last week's cash trade. Price action is likely to remain choppy in live cattle futures until cash cattle trade gets underway.

Technical analysis: Key near-term boundaries for June live cattle futures are the contract low at $120.20 and the April 1 high at $124.50. A close above the top of this range would suggest an extended price recovery is underway, while a downside breakout would extend the downtrend from the December high.


Price action: Feeder cattle futures closed steady to slightly lower in all but some of the far-deferred contracts.

Fundamental analysis: A lack of strong price direction in live cattle kept feeder cattle relatively quiet today. But strength in the corn market caused feeders to favor the downside.

Technical analysis: Despite recent indications August feeder cattle have put in a low, the market is struggling to find consistent buying interest. To confirm a low and signal an extended price recovery is underway, the contract must push above the April 1 high at $154.40.

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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