GENERAL COMMENTS:
Cattle futures are searching for direction and that direction seems to be a continuation of the overall trend higher. Futures have a way to move back to new highs, but there certainly seems to be support under the market. The fact that both feeder and live cattle held well despite the surge of corn speaks volumes of the overall attitude. Cash has not yet traded this week and is not expected to trade today as asking prices in the South have been revealed while bids are not yet posted. The concern for the week will be continued weakness of boxed beef with choice down $1.80 and select down $2.10. Although futures held even with higher corn prices, those higher prices may actually be negative to cash this week as feedlots may not want to hang onto cattle any longer than necessary.
Hog futures looked dismal for a period yesterday with February challenging the low with the rest of the contracts making fresh lows. However, contracts were able to find footing as some short covering took place. Futures are significantly oversold but have not been able to find technical or fundamental support. Cash was higher with the National Direct Afternoon Hog report up $0.55, but that was overshadowed by another loss of $0.86 for cutout values. There is strong potential for cash to advance again today as packers will want to get as much business done today as they can rather than wait.
| BULL SIDE | BEAR SIDE | ||
| 1) | The cattle complex was able to hold and advance in the face of higher corn prices. The overall uptrend in live cattle is intact. | 1) | Strong corn prices may leave feedlots less willing to hold onto cattle any longer than necessary. They may not hold out for higher cash. |
| 2) | The neutral Cattle of Feed report and the numbers showing a continued contraction of the herd should keep traders overall bullish on prices. | 2) | Boxed beef weakness is causing concern over a slowing of demand. The price of select cuts is running below a year ago. |
| 3) | Hog futures are significantly oversold which could result in some short covering at any time. Traders are waiting for a catalyst to trigger the move. | 3) | Pork cutouts have not yet found solid support. Futures may remain weak until that is accomplished. |
| 4) | The rebound of hogs of the lows yesterday may indicate traders could be unwilling to press the downside much more. | 4) | The lean hog index continues to decline, keeping pressure on the market. February continues to carry a premium to the index and cash. |
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