GENERAL COMMENTS:
Live cattle opened higher Wednesday but could not hold onto those gains. Fundamentals are just not strong enough to trigger any widespread buying interest in traders. Weaker cash this week continues to leave June at a discount to cash with one month remaining for the contract. A lot can happen over the next month with the trade holding a discount, believing further weakness may develop. Packers have been able to purchase needed supply without difficulty, allowing for them to purchase a couple of weeks ahead of time. Boxed beef was lower with choice down $0.72 and select down $1.29. Feeder cattle closed mixed Wednesday, unable to gain from weaker corn prices. Further weakness in corn developed overnight but that may not have a large impact on activity today. Thursday is the last trading day for the May contract with August taking over as front-month. Weekly export sales are not expected to have a significant impact on the market.
Hog futures had a substantial price swing Wednesday with early strength succumbing to selling pressure into the close. Traders were disappointed with the direction of cutouts as the morning report showed lower prices. The final print for the day showed cutouts down $1.17. The National Direct Afternoon Hog report showed cash up slightly with a gain of $0.04. The question is whether packers will need to be more aggressive Thursday in their quest to maintain chain speed. Memorial Day weekend is nearly upon us with consumers having purchased their needs for the holiday. Product movement will be assessed next week, and orders placed accordingly. Weekly export sales may provide some impact on direction. Saturday slaughter is projected at 10,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Lower corn futures overnight should provide some support to feeder cattle with the potential spillover into live cattle. |
1) | Cattle did not react positively to lower corn futures yesterday with the same potential today. Corn prices still remain high. |
| 2) | June live cattle hold a substantial discount to cash. Futures may begin to converge to cash soon. |
2) | Packers have been able to purchase what they need for the week and have been able to contract supply for the next few weeks. This leaves them with the upper hand. |
| 3) | Packers seem a bit light on their hog purchases so far this week and may be more aggressive Thursday. This could mean higher cash. |
3) | Hogs failed in their attempt to move higher Thursday with the barometer being cutout values. Weakness of cutouts resulted in lower futures. |
| 4) | Pork demand may be improving as the grilling season kicks off with Memorial Day. Strong demand over the weekend may find retailers increasing orders. |
4) | Chart gaps remain substantially below current futures prices. Technical traders view that as a target. |
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