General Comments:
There was a feeling of bullishness in the air Tuesday as cattle futures moved back above price resistance. The prospect of higher cash this week as well as a stronger indication that the seasonal spring rally is beginning gave confidence to traders to own futures contracts. It was a nice way to celebrate National Ag Day. Boxed beef prices were strong, possibly indicating consumer demand will remain strong in the coming weeks. Stimulus money is being received and restaurant demand is improving. Cash trade has not yet taken place, and it is very possible there will not be any Wednesday as current market fundamentals may have feedlots holding out for higher prices.
Hogs were again on fire Tuesday after futures took a little breather. Only April made a new contract high with the rest of the contracts stopping just shy of new highs. There is just no stopping the aggressiveness of packers as they continue to pay higher prices, and rightly so. Demand is strong with consumers not showing any price resistance. Cutouts were very strong, underpinning the market. Technical indicators are enticing traders to buy futures as the trend is up with more room left to the upside. The hog supply is expected to be lower during the second quarter and in another week, the market will be entering that period. The quarterly Hog and Pig report on Thursday could temper trader aggressiveness Wednesday.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle futures pushed back above price resistance, which may stimulate technical traders to step into the market on the long side. | 1) | There is risk some feedlots may need to move cattle and steady packer bids could trigger business Wednesday. |
| 2) | Strong boxed beef and strong demand is expected to result in higher cash this week. | 2) | Cattle futures still have a distance to go to regain what was lost last week. Any stalling of the rally could trigger selling. |
| 3) | The slight correction of hog futures was enough to bring traders back into the market to positions themselves for higher prices. | 3) | The upcoming Hog and Pig report could leave traders content with steady prices. It could also trigger some profit-taking just as a precautionary measure. |
| 4) | Strong cutouts and aggressive packers should push futures to new highs even before or after the Hog and Pig report on Thursday. | 4) | The inability of future to achieve new contract highs may establish that level as a place to set sell orders moving the market into a sideway pattern. |
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