April 14, 2010

 

US hog futures rebounds on short-covering

 

 

CME hogs bounced back Tuesday from two days of relative weakness on short-covering and word that Russia may soon end its ban on US poultry.

 

Bullish speculative hog traders were swayed by talk that Russia and the US are close to ironing out their differences over US poultry imports. Poultry from the US was barred by Russia in January due to a dispute over the use of chlorinated water during processing.

 

The resumption of poultry shipments to Russia could reduce the domestic availability of less-expensive chicken that is competing head-to-head with pork.

 

Lean hogs gained from the outset, fuelled by steadily rising wholesale pork values. June and July made further headway after both months moved beyond recent highs, which set off pre-placed orders to buy in the process.

 

Spreading was popular during Tuesday's otherwise tranquil session. Spreads consist of trading two or more contracts at the same time while capitalising on the price differences between them.

 

Traders bought June hogs and sold July and December on spreads. Some spreaders purchased lean hogs and sold live cattle.

 

Meanwhile, spot-April hogs weaved in and out of negative territory, guided by ideas about where it and CME's lean hog index would converge after spot-month expiration on April 15.

 

Nearby-April hogs closed up 0.37 cent a pound, or 0.5%, at 76.75 cents. Most-actively traded June ended 1.50 cents, or 1.8%, at 85.47 cents. July finished up 0.82 cent, or 1.0%, at 84.90 cents.

 

May bellies closed down 1.05 cents, or 1.1%, at 94.70 cents. July ended 1.00-cent higher, or 1.0%, at 97.00 cents.

 

Meanwhile, pit-traded CME live cattle withdrew due to steady-to-lower cash cattle prices so far this week and spreading out of April and August into June.

 

Live cattle slipped from the outset on selling leftover from futures' declines Monday. Also, uncertainty about how subsequent cash cattle prices would fare, after packers paid steady-to-lower money for supplies Monday, weighed on futures Tuesday.

 

Spot-April quickly faded after it filled the trading space between its April 7 low and April 6 high, where there wasn't enough buying interest to cushion the spot month's fall.

 

Nearby-April live cattle ended down 0.67 cent a pound, or 0.7%, at 98.32 cents. Most-actively traded June closed down 0.57 cent, or 0.6%, at 93.47 cents.

 

Feeder cattle closed sharply lower due to futures' bearish price premiums compared with CME's feeder cattle index. April and May feeders also filled recent chart gaps that consisted of "air" beneath those months.

 

Nearby-April ended down 0.72 cent, or 0.6%, at 113.30 cents. Most-actively traded May closed down 1.45 cents, or 1.3%, at 113.60 cents. August finished 1.25 cents lower, or 1.1%, at 115.22 cents.