The ability for buyers to step into the market Tuesday is likely to help draw additional interest back to the table midweek due to some increased desire to help stabilize the complex through the end of the month. Even though there are two more trading sessions in the month of March, and the end of the first quarter, overall volume is likely to remain sluggish as several traders are already expecting to back away from the market based on the upcoming long weekend. Feeder cattle futures were the only market to hold gains at the end of the session Tuesday, which may limit follow-through support. Cash cattle trade remains undeveloped at this point, but bids and asking prices are likely to become much more active through the day Wednesday with the desire for both sides to accomplish needed business before Friday if possible.
Early activity is expected to be a mix of follow-through selling activity and short-covering as traders try to square positions over the next two trading sessions for the month andquarter's end. The overall tone of the market remains weak due to the expectation that increased concerns of demand weakness may continue to erode buyer support. Any buying activity that is in the market may be limited early in the session due to potential outside market weakness that may develop Wednesday morning. Cash hog values are expected to remain weak with bids steady to $1 per cwt lower in most areas. Overall packer runs are expected to be at 456,000 head Wednesday. Packers are already starting to look ahead to the reduced schedules surrounding the weekend. Friday runs are expected to be 430,000 head, Saturday runsare expected to be105,000 head, and Monday runs are expected to bereduced to 320,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | The break in the trend of moderate-to-sharp losses in live cattle and feeder cattle trade Tuesday is creating some anticipation of increased buyer interest moving into the market. | 1) |
Moderate-to-strong cash market pressure is expected through the end of the week due to the recent pressure that quickly developed across the live cattle and feeder cattle markets through the last couple of weeks.
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| 2) |
Lack of premium in nearby feeder cattle futures is allowing increased contract rolling through all spring and most summer contracts. This is expected to help stimulate growing open interest in the coming days and weeks.
| 2) |
Aggressive discounts in summer live cattle futures compared to the spot month April contract has limited longer-term support. Currently, June futures are holding a $10 per cwt discount, which is limiting overall trade interest andwill likely erode longer-term cash markets through the summer.
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| 3) |
Buyer support that developed earlier in the week is expected to move back into the market as traders focus on increased seasonal pork demand building through the rest of the spring months. Overall demand for pork remains strong and is likely to help add trade interest over the near future.
| 3) | Limited packer needs through the end of the week due to holiday schedules is expected to keep cash hog values under pressure. Packer reductions are expected to start Friday and run all the way through Monday. But the extended lower production through the next week will limitpacker access to hogs. |
| 4) | Strong summer premiums continue to hold in lean hog futures with June contracts trading nearly $18 per cwt above the April futures contract. This may add even more underlying support once active buying starts to develop late in the week. | 4) | Pork cutout values have continued to weaken in the recent days. Sharp losses in belly markets despite the focus on upcoming possible summer demand and the expected pullback in the ham market after the Easter season is likely to add even more pressure to the complex. |
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