Cattle are making a run for the highs with the strength Monday. Much of the strength seemed to be the result of the indication that slaughter pace might be near normal again soon and may cause packers to bid more aggressively to procure needed cattle. Cash did not trade Monday with no bids or offers floated. Showlists were mixed. The weakness of corn may not have been much of a factor as corn futures are still high and made new contract highs before falling back. The anticipation of a friendly cattle inventory report was likely more of a driving factor. Bullish traders were correct in their assessment as the inventory report showed all cattle and calves on Jan. 1 at 98% of a year ago. Boxed beef was slightly weaker with choice down $0.02 and select down $0.14. The Commitment of Traders report showed funds as net sellers of 12,856 contracts bringing their net long positions to 49,321.
Hogs did not receive spillover from cattle, as trading was as anticipated moving through the end of the month. Traders saw weaker cash and weakness in cutouts, which kept futures from triple-digit gains. Cash plummeted with a decline of $6.58 on the National Direct Afternoon report. Cutouts declined $1.88. Futures held well as traders remain friendly to the market as time moves forward. With a new month upon us, traders might be more apt to buy into the market for the long term. The Commitment of Traders report showed funds as net buyers of 18,112 contracts bringing their net long positions to 66,907.
| BULL SIDE | BEAR SIDE | ||
| 1) | The Cattle Inventory report showed lower numbers in all categories. This solidifies the potential for tighter supplies as we move though the year. |
1) | Live cattle are potentially forming a technical head and shoulders top which could trigger selling if futures cannot move to new highs and negate the technical setup. |
| 2) | Live cattle futures are heading to challenge the highs, which might be achieved with potential tightening supplies and increasing slaughter pace. |
2) | February and April feeder cattle closed the chart gaps which could trigger some liquidation. The market could also see a buy-the-rumor, sell-the-fact reaction to the inventory report. |
| 3) | Hog futures held well despite a substantial decline in cash and lower cutouts. Traders are looking past that to good demand and tighter supplies. |
3) | Hog futures need to renew the uptrend soon or traders could become bored and liquidate their long positions. |
| 4) | A new month could bring a renewed interest in buying into the market for the longer term and higher prices. |
4) | The sharp decline of cash yesterday might carry over into selling pressure Tuesday. There are sufficient hogs for the time being. |
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