General Comments:
Cattle futures moved lower again Thursday as the second day of liquidation took place. The cattle complex certainly has not turned bearish, but a correction was in order and has been running its course. To some extent, traders are looking past the winter storm and have determined there was too much price premium of futures over cash. Technically, this has not changed the trend with April closing just below the 20-day moving average support while later contracts held that support. This might gain the interest of technical traders that want to add to their long positions. The cash market has not really been tested yet, but a general anticipation of higher cash is prevalent. The lack of aggressive bids being placed by packers this late in the week may mean that they want to play hardball. With some plants shut down, they may not care this week about numbers. If cattle are carried over into next week, it could make the market very interesting as packers will want more cattle while at the same time, feedlots will want to move cattle. Strong cutouts indicate good demand. As long as that demand is there, packers will want to meet it. The Cattle on Feed report will be released Friday afternoon. The average estimate for cattle on feed is 100.9%, placements at 99.9% and marketings at 94.7%.
Hogs are resilient with futures rejecting the lows of the day and closing slightly higher. Traders clearly took advantage of the weakness in futures to step back into the market. Strong demand is keeping packers aggressively bidding to obtain the hogs they need. The weather has not hindered hog purchases with packers maybe more aggressive as the weather system moves through and consumers return to grocery stores to stock up on pork. Higher cutouts Thursday will keep plants wanting to increase chain speed to take advantage of continued strong demand. Exports sales will be out Friday after being delayed one day due to the holiday on Monday. The report will have an impact on where futures move from here. Saturday slaughter is estimated at 254,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Packers will want cattle to fill demand. At least $1.00 higher cash is expected, but if trade is light, they may be more aggressive next week. |
1) | The weather delays may have already been factored into the market. Futures may still be too high after two days of liquidation. Traders will be looking ahead to the Cattle on Feed report to be released Friday afternoon. |
| 2) | Two days of lower futures have corrected an overbought market, giving traders more confidence to buy back into the market. After all, fundamentals remain bullish. | 2) | Cattle are holding too much premium to cash in the April futures contract and traders may continue to move it closer to cash. |
| 3) | Pork cutout turned higher and packers were again aggressive and bidding higher to make up for some lighter runs. |
3) | Even though hog futures held well Thursday, the market remains overbought and needs to make a further price correction. |
| 4) | Futures bounced back from the lows Thursday, indicating traders are ready and willing to continue to ride the market higher. |
4) | Anything less than a stellar export report may trigger further weakness of futures. |
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