GENERAL COMMENTS:
Feeder cattle may remain under pressure Monday due to higher grain prices overnight. Live cattle might begin the day mixed with some anticipation of higher cash for the week. Packers may hold back early, waiting to see how anxious feedlots might be to move cattle due to higher feed prices. However, with packing plants up and running, packers may need to be slightly more aggressive with cattle purchases this week. Traders will be cautious early until they see how cash bids will unfold. However, that is not expected Monday as showlists will be posted with no business expected to be done. Boxed beef prices declined Friday with choice down $1.57 and select down $1.43. One has to wonder if the run higher for boxed beef has come to an end, but one day does not necessarily mean a change in the market trend.
Hog futures closed higher for the week with all contracts posting new highs with the exception of August. Demand is robust with packers making up for the disruption in the market early last week with strong slaughter numbers. There is little to be bearish about in this market at the present time. Domestic demand remains strong. Export demand is good. Cutouts were higher again on Friday with a gain of $1.11. Cash was higher on Friday with the National Direct report showing a gain of $0.95. Packers did purchase quite a few hogs last week, which may make them a bit less aggressive to begin the week.
| BULL SIDE | BEAR SIDE | ||
| 1) | The disruption of JBS plants is history with plants making a large effort to catch up on processing. This may mean more aggressive buying this week. | 1) | There is concern there could be some backlog in the market, which will need to be cleaned up. Even though the JBS disruption was short-lived, packers may not be aggressive to begin the week. |
| 2) | June continues to hold a discount to cash. With cash so far no worse than steady the past few weeks, futures may need to increase to get in line. |
2) | Higher grain prices may increase the desire of feedlots to move cattle early rather than hold out for higher prices. |
| 3) | New contract highs in hog futures again on Friday keeps the trend solidly higher. Traders want to own hogs. | 3) | The July hog contract still has a price gap at $116.85 that may be filled at some point. |
| 4) | Packers were aggressive in purchasing hogs early last week, and that did change the rest of the week as demand for pork remains strong. | 4) | Hog futures are becoming overbought technically again, which could trigger selling if some negative news were to be released. |
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