Even though bids and offers became more evident through the day Wednesday, there was little incentive for either side to focus on getting much business done at this point of the week. The Fed Cattle exchange which traditionally is seen as the first indicator of cash business of the week was delayed due to technical challenges, and will trade Thursday morning at 10 a.m. This may start the ball rolling more effectively in feedlot country once business gets done on the FEC Auction. Futures are expected to remain mixed with a combination of follow-through buyer support redeveloping after regaining ground from earlier in the week, while the weaker undertone that still exists in the feeder cattle market could hamper any end-of-week momentum, causing some position taking.
Fundamental strength is once again expected to help keep cash hog prices elevated as packers continue to become aggressive in sourcing hogs even though overall end-of-week procurement numbers have slowed significantly. With a Saturday run of 28,000 and lighter Friday plant runs expected, it is still expected that packers are going to need to dig deeper into pockets to find market ready hogs, or producers willing to sell them in order to fill those procurement desires. Lean hog futures trade is likely to remain sluggish in a narrow range as the overall lack of volume may continue to limit the upward movement in the complex.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Live cattle futures continue to hold onto buyer support with front-month June contracts rebounding midweek despite strong early week pressure and have established themselves back in the top level of the range. Although prices have not moved back to contract highs, Markets closed within $1 per cwt of that level Wednesday
| 1) | Extremely sharp losses seen in feeder cattle futures Tuesday have once again shown just how thinly traded and easily manipulated the market can be in a short period of time. Markets continue to remain extremely choppy in the feeder cattle complex as unsettled moves have allowed for triple digit moves to move in and out of the complex through the last couple of trading sessions with little effort. This lack of consistency will likely limit additional strong support across the rest of the market. |
| 2) | Commercial buyers continue to remain extremely active in live cattle markets with total open interest near 415,000 contracts. This aggressive interest in the market continues to drive the recent market rally and is likely to help focus on expectations of longer term demand support through the complex. | 2) | The lack of steady movement in futures trade and uncertainty in outside market moves is creating some questions as to just how much underlying support will develop through cash cattle trade through the end of the week. Even though the under tone remains firm in live cattle markets, the upheaval seen earlier in the week in futures trade is likely to limit the overall support of cash buying and keep packers cautious that the next round of liquidation is just around the corner. |
| 3) |
Lean hog futures continue to hold well above the $81 per cwt price levels in summer contracts. The back-and-forth choppy trade levels seen across the market have allowed price levels to keep markets focused on the development of cash market activity over the near future, but also long-term supplies.
| 3) | Lack of buyer support in nearby lean hog futures is allowing for markets to show uncertainty through the end of the week. Even with prices holding above $80 per cwt in summer contracts, there are concerns if the fundamental support is enough to draw futures traders back into the complex and elevate futures even further. |
| 4) | Cash hog prices have rallied higher through the end of the week with aggressive packer buying activity moving the cash prices on the national report to $76.30 per cwt Wednesday afternoon. This continued market support and strong volume of hogs moving at these higher price levels are helping to stimulate strong buyer interest. | 4) | Pork cutout values have remain firm, but the lack of overall strong market optimism compared to recent aggressive gains in the cash hog market have been hard to see in pork values as of yet. Traders are closely monitoring pork values through early summer in order to determine if products continue to remain current and price levels are following the overall trend of the market. |
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