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Pork Futures: Hogs Surge

by 5m Editor
18 July 2007, at 8:46am

CHICAGO - Chicago Mercantile Exchange lean hog contracts finished sharply higher Tuesday, with October limit up, on fund buying, buy stops and massive short covering. That earlier drove August and October up the daily price limit. Pork bellies closed mixed.

Meanwhile, live cattle closed firm and feeder cattle higher on the day.

Given calls for only mildly bullish cash hog prices, lean hogs unexpectedly jumped on the open, spurred by August fund purchases that later tripped buy stops. August's runup forced bears to cover previously held positions.

Additional technical buying gave August and October added lift despite both contracts' moderately overbought Relative Strength Index conditions and bearish premiums to CME's hog index.

What's more, speculative hog buyers dove into distant contracts despite not having the support of Chicago Board of Trade corn that faded as the session wore on.

The bulk of Tuesday's board action was attributed to technical jockeying and August/October bull spreading that later reversed itself. Subsequent August/October bear positioning again elevated October to the daily price limit into the close and drove the contract to a four-month high, but trimmed August's advances.

Also, some market participants believe that part of the market's bullish tone was due to the possibility that China might purchase US pork after the two countries iron out their differences.

Fundamentals played a negligible role in Tuesday's trade because of Monday's slight pork cutout rise, traders said. Also, cash hog prices were reported mixed Tuesday with more of the same expected Wednesday.

Source: FXSTREET.com

5m Editor