General Comments:
On occasion, significant cattle business is put off until the last day of the week at which time a flurry of activity takes place. This is one of those weeks. Feedlots have been holding out for packers to put some higher digits on their bids. Bids have been hovering around $112 while futures show $4.00 higher. This has been giving feedlots the resolve to hold out in the anticipation buyers will be more aggressive as they need to procure cattle for processing. Trade is not expected to take place all the way up to $116, but likely some middle ground will be found. The fact that boxed beef gained significantly Thursday should increase the desire to increase bids to obtain the cattle to meet demand. Technically, cattle are overbought, and any weakness of fundamentals could trigger futures selling. The Cattle Inventory report will be released Friday, which may not have a large influence on trading.
Hog futures are rolling over, relieving an overbought market situation. Weights are higher than a year ago, putting more pork in the market, yet weights have recently been decreasing from the beginning of the year. Strong exports and December cold storage are showing strong demand with belly stocks substantially lower than a year ago, which should keep support under the market. Analysts have been talking about large pork supplies for quite some time, but April hogs are near the highest prices since mid-November 2019. Supply is being absorbed without difficulty.
| BULL SIDE | BEAR SIDE | ||
| 1) | Bids are expected to be raised Friday in order to purchase needed supply to keep plants operating at steady speeds. Feedlots want to sell but are holding out for higher prices. | 1) | Although packers may raise their bids, the premium of futures to cash may be a bit too much for the time being. There is no shortage of beef for the market. |
| 2) | Strong boxed beef prices should add to the urgency of buyers to purchase cattle as packing plants want to take advantage of better margins. |
2) | The recent surge of futures seems to have run its course. If the Cattle Inventory report shows more cattle than a year ago and weights continue to remain higher, traders may sell the market. |
| 3) | A stronger cash market has pushed futures significantly higher as fundamentals remain supportive. Packers will want to take advantage of current pork demand. |
3) | Hog futures posting lower highs and lower lows Thursday may increase short-term selling interest into the weekend. |
| 4) | Technically, hog futures have relieved an overbought market and are now ready to resume the uptrend as cash news remains mostly positive. | 4) | The potential slowing of demand for pork to China will be a cloud that will remain over this market. This could trigger selling at any time if there is an indication of exports declining. Domestic demand would not be able to absorb the increased supply at current prices. |
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