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Pork Futures: Hogs Up On Higher Corn

by 5m Editor
26 April 2007, at 9:04am

CHICAGO - The Chicago Mercantile Exchange lean hog futures closed higher Wednesday on short covering, areas of cash strength, buy stops and Chicago Board of Trade corn that hit the 20 cent-per-bushel daily price limit. Pork bellies also finished up sharply.

Meanwhile, live cattle settled mixed, and feeders dropped sharply in response to higher CBOT feedgrains.

Pork futures wilted at the start as prospective buyers stepped back due to uncertainty regarding news about tainted hog feed. The lack of board buying interest allowed selling from Tuesday to run its course. And, steady to generally weak terminal hog market bids fed into bearish notions that processors were responding to thin packer profit margins.

However, short position holders "ran out of bullets" when the more significantly traded direct hog market quotes came in better than expected, a trader said. Index funds got involved after June bounced off 100-day moving average support and CBOT corn "caught fire," he said.

Sentiments that Tuesday's lean hog sell-off was overstated contributed to futures' snapback on Wednesday. Nonetheless, there are concerns that the board will remain range-bound because of bearish front-month premiums to CME's hog index, a favorable long-term fundamental outlook and technical issues.

"You've got all this stuff going on with premiums, fundamentals and charts and they're canceling each other out," a broker said. "Outside of corn, we had a nothing market today and when people look back on today's trade they'll probably say it too was overdone."

Country hog buyers predict steady to weaker hog prices on Thursday despite packer margins that on Tuesday showed considerable improvement.

Technically, June hogs settled above 20- and 40-day moving average support levels while July closed below 40-day moving average resistance.

Source: FXSTREET.com

5m Editor