GENERAL COMMENTS:
Cattle futures do not look healthy after the past few days and especially since June and August contracts closed below support of the 20-day moving average. Traders have not found a reason to step back into the market. Boxed beef was mixed, providing some cause for concern. It is unclear what bids and offers will be posted for cash, but these should surface Wednesday. Feedlots are a bit unnerved by the substantial decline of futures after the strong increase of cash last week. Feedlots will ask higher prices, but will they receive them? Packers are hoping to see some interest in selling at last week's prices or only $1.00 or $2.00 higher rather than a repeat of last week. Packers will need to purchase cattle as demand remains strong even though boxed beef settled mixed Tuesday. The strong increase of corn prices Tuesday may keep feedlots interested in moving cattle rather than play the waiting game.
Hog futures moved on both sides of unchanged Tuesday uncertain of which direction it should take. Futures could not muster enough buying interest to regain what was lost on Monday. Higher cash and a strong increase of cutouts Tuesday provided support to keep further liquidation at bay. The trend remains up, but the market may have a difficult time moving back to making new highs again during the rest of the week. The market is far from gloom and doom as packers remain aggressive. China imported 1.02 million tons of pork in March, which is the highest amount since January 2020. Continued strong exports sales reports will be necessary to keep support under the market and keep the trend higher. Hog supplies are expected to tighten as the year progresses, but any slowing of exports could put more supply on the domestic market.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cash cattle are expected to trade higher this week with business later in the week potentially increasing price potential. |
1) | Cattle futures still have not been able to find a bottom. Higher grain prices continue to exert downward pressure. |
| 2) | Fundamentals have not changed, and packers need to purchase cattle. Strong demand needs to be satisfied. |
2) | It is becoming more expensive to feed cattle and feedlots will want to remain current. This could increase their anxiousness to sell. |
| 3) | Hogs were able to reject lower trade Tuesday generally closing higher. This should give traders some confidence to buy the break. |
3) | Any further weakness in hog futures could trigger further selling as technical support might be penetrated. The price gap in June is about $3.00 lower and could be filled. |
| 4) | Higher cash and strong cutouts should provide solid support. The trend remains up. | 4) | A top might have been reached and futures could chop sideways for the time being as traders assess the overall market balance. |
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