General Comments:
Cattle futures Monday were able to regain some of the loss of last week, but the gains were minimal and hard to come by. The Cattle on Feed report was not friendly enough to spark any major buying interest, but futures were a bit overdone to the downside. It may be difficult for traders to get too bullish about this market unless futures move above last week's technical support, which is now this week's resistance. Total beef in cold storage for the month of February was up 3% from February 2020, but down 2% from January. The decline during of month of three less days than January is a positive sign for demand. This was somewhat expected as restaurant demand has been improving. Hopefully stronger boxed beef prices will increase the need for packers to purchase cattle, resulting in higher cash this week. The Commitment of Traders report showed funds were net buyers of 1,900 futures contracts increasing their net long positions to 83,560.
Hog futures struggled for a while Monday and even though some contracts closed lower, they had come back off their lows by quite a bit. Packers remained aggressive with an increase of $2.55 on the National Direct Hog report. Pork is in demand and there is plenty of room in cold storage. The February Cold Storage report showed total pork inventory increasing 7% from January, but inventory is down 24% from a year ago. Boneless pork was the most bullish of the categories with it being 4% less than January and 23% less than a year ago. The ideal is to limit inventory growth, but if it does increase, it will not be bearish to the market for a period of time. Technically, June through August futures are flirting with the uptrend line, which is some cause for concern. The Commitment of Traders report showed funds as net buyers of 1,546 contracts, bringing their net-long positions to 75,833.
| BULL SIDE | BEAR SIDE | ||
| 1) | The Cattle on Feed report is behind us and futures were able to close higher. Trader are defending their long positions. | 1) | The rebound of cattle futures after the large sell-off last week leaves much to be desired. Traders may remain neutral until cash provides direction. |
| 2) | Boxed beef prices are showing some strength, which may result in packers becoming more aggressive this week with potentially higher bids. | 2) | Packers may not be willing to increase bids this week or increase them very little. Feedlots need to move cattle and may take what they can get at steady prices. |
| 3) | Hog futures punched below the uptrend line Monday but were able to close back above it. This keeps the overall uptrend intact. | 3) | Hog futures testing the uptrend may be a foretaste of what may unfold if there is any slowing of packer aggressiveness. |
| 4) | Packer were again aggressive with cash as they see tighter supplies developing and want to get as many hogs as they can to satisfy strong demand. | 4) | Cutout may be showing early signs of wavering, which may indicate prices have found some demand resistance. The restaurant pipeline may be filled to where it needs to be for the time being with retail demand needing to carry the baton. |
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