General Comments:
Cattle futures came under pressure Friday partly as a delayed reaction to another week of slower exports, partly due to it being a Friday and partly due to the market in need of a price correction to relieve the overbought technical status. However, overall beef exports remain good with cumulative exports so far this year 89,425 metric tons (mt) higher than the same period last year reaching 459,439 mt. Looking back through the week, there was no reason for futures to decline on Friday as much as they had, or if at all. But such is the nature of the market. The key this week will be if traders will buy back into the weakness and if cash prices will trade higher. The anticipation is that higher cash is almost assured due to strong demand. Cutouts rocketed higher last week, causing packers to aggressively raise bids to procure needed cattle. That is not expected to change this week as demand seems to be red hot. There is no reason last week's strength should not carry over into this week. Cash cattle were traded earlier last week than usual, and I expect the same this week as packers will likely raise bids early to get cattle to fill demand.
Hogs did not feel the pressure from cattle. They held their own with most contracts posting higher prices. Thursday is the last trading day for April hogs with futures holding right in line with cash. May 2021 through April 2022 futures again made new contract highs Friday with the exception of August. August seems to have been the victim of spread trading and has not been able to make a new contract high since April 1. There is no other reason the contract should be lagging the others. The National Direct price moved higher Friday with cutouts showing an impressive gain. Hogs supplies are expected to tighten, keeping packers aggressive now as long as profits are good.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong boxed beef prices last week were not just a flash in the pan. Demand is building and packers need to aggressively own cattle. | 1) | A price correction many times lasts for two to three days. Friday was day one with Monday potentially seeing more weakness if that pattern holds. |
| 2) | The large decline of futures Friday took away about a week's worth of gains, but it has not broken support or changed the trend. Traders may buy the break. |
2) | Weakness of futures could cause packers to pull back on bidding aggressively waiting to see if further losses are possible. |
| 3) | Hog futures continue to make new highs with no underlying reason to change that pattern. The market is concerned about tightening supply. |
3) | Hog futures remain extremely overbought with any negative news potentially triggering a sell-off. |
| 4) | Demand has not reached price resistance yet and packers remain aggressive. As long as it continues, higher prices will continue. |
4) | It is too early to tell of China will back away from the export market further. They were not in the top three buyers last week. If they reduce imports of pork, domestic supplies could grow. |
No comments:
Post a Comment