General Comments:
It was a bit disappointing to see April cattle futures closing unchanged. The April contract has been in a sideways range since the beginning of the month. Traders are holding out hopes for cash to achieve the $118 or $119 level, but cash has not been able to accomplish that yet. However, there is another month for cash to be able to achieve that level or higher. Higher cash Wednesday was certainly welcomed by feedlots with hopes of that continuing. The seasonal spring rally will need to be supported by good exports and strong cash prices. USDA will release the weekly Export Sales report Thursday morning and that will be part of what is needed to achieve higher prices. Futures still have quite a way to go to regain what was lost last week, but the attitude has turned more bullish now that packers have shown they need cattle and are willing to pay up for them.
Even though the trend is up and April and May hog futures made new highs Wednesday, traders may be apprehensive of the upcoming Hogs and Pigs report Thursday afternoon. This may keep price volatility subdued with most traders likely feeling confident, holding long positions. The average trade estimate for all hogs and pigs is 100.1% of last year. Kept for breeding is 98.7% and kept for marketing at 100.2%. Again, a lot of near-term trading will depend on where the actual numbers fall in relation to these estimates. Strong cutouts indicate this market may not be impacted much even if the report is slightly bearish as demand is not letting up. Exports sales will likely be positive Thursday as international demand remains strong. Saturday slaughter is projected at 143,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle have finally moved the cash needle to the upside. The seasonal demand may be magnified by increasing demand from restaurants. | 1) | Nearby cattle futures were unable to push much higher Wednesday even though cash prices increased. Futures may wait to see of cash will catch up. |
| 2) | Traders may be more confident to add to long positions now that packers are more aggressive, improving support under the market. |
2) | Any weakness of export sales and cash prices may stall as the market will balance supply with demand. |
| 3) | Hog futures continue to perform well through July. Traders give the impression they believe the Hogs and Pigs report will be friendly. | 3) | Negative numbers on the Hogs and Pigs report Thursday afternoon could top the market setting a level of price resistance. |
| 4) | Strong cutouts indicate there is no slowing down of demand. Higher prices are yet to come. | 4) | June and later futures contracts have not been able to move back to new highs. The market may be running out of steam in anticipation of some demand destruction over time. |
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