General Comments:
Feedlots accomplished what they set out to do and that was to raise cash prices. That was accomplished to some degree last week, but maybe not as much as desired. Live cattle gained $1.00 with dressed up to $2.00 higher. Sights will again be set on higher cash due to continued strong demand. Cumulative export sales reached 285,307 metric tons (mt) so far this year, up 69,163 mt over the same period last year and a record high amount for the period. A higher high and higher low in February and April cattle futures Friday helped keep the recent higher trend intact with traders setting their sights on revisiting the highs on Jan. 26. With boxed beef prices closing moderately higher Friday and $5.03 higher than a week ago, feedlots intend to take further advantage of the strength and set higher offers. Futures continue to maintain a premium to cash.
February hogs need to remain close to cash, unable to follow the strength of later contracts. April and later contracts continue to reach to new highs as current fundamentals continue to support higher prices. Packers came in a bit more aggressively than anticipated Friday, adding to the bullishness. Exports remain better than expected and may continue to do so as China continues to deal with disease issues slowing the rebuilding of their herds. The market is overbought technically, but continued support from cash and cutouts will keep traders friendly to the market.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cash cattle traded higher last week, giving confidence for feedlots to offer higher prices again this week. Continued strong demand should keep packers bidding no less that steady prices. | 1) | The large premium of April cattle to current cash may be a lot to ask given the fact that the strength of boxed beef may have run its course. Boxed beef prices are beginning to be choppy. |
| 2) | Futures hold a premium to cash in anticipation of higher prices. April broke through chart resistance closing at a new high. Funds may keep buying. | 2) | Dressed weights continue to run higher than a year ago and higher than the five-year average. Any slowing of demand could trigger significantly selling of futures contracts. |
| 3) | Hog futures continue to climb with positive fundamentals. Packers are somewhat aggressive as they are fulfilling positive demand. Packers may start the week with steady bids but may increase those quickly to procure supply. |
3) | Even though fundamentals are positive, hog futures are overbought and ripe for a price correction. |
| 4) | New highs in futures will give traders confidence to hold and add to long positions. The path of least resistance is up. |
4) | Pork cutouts will need to continue to increase in order to keep cash prices supported. Any weakness might result in packers pulling back and futures falling as premium to cash would quickly erode. |
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