GENERAL COMMENTS:
Cattle futures pushed to new contract highs across the board, except for August, which fell just shy of the mid-April high. That may be accomplished Friday. However, with a three-day weekend coming up, trade may be two-sided today as some liquidation may take place since, many times, traders like to lighten up their positions ahead of an extended weekend. Higher cash this week provided the support the market needed to continue the trend higher. Boxed beef prices were higher with choice up $1.64 and select up $0.75. Weekly export sales totaled 18,300 metric tons (mt), up 5% from the previous week, providing some of the support seen Thursday. Some cash business will be conducted Friday, but it will be in line with trade so far this week. August feeder cattle are now the lead month. Futures were on a roller coaster Thursday, posting significant losses at some point, only to close slightly higher. The overnight strength of corn and extended weekend positioning may put some pressure on futures.
Hog futures were basically in a freefall again Thursday. Traders who buy into the market attempting to try and pick the bottom continue to get run over. Reduced cash and mediocre exports provided no support. Packers did not need to chase after supply as the National Direct Afternoon Hog report showed cash down $2.73. Weekly export sales totaled 29,200 mt, down 8% from the previous week. Cutouts were a bright spot, increasing $0.32, but that did little to stem the tide. Some short-covering could take place ahead of the weekend, but funds are content to hold a large, net-short position.
| BULL SIDE | BEAR SIDE | ||
| 1) | New contract highs in live cattle futures continue to provide the confidence needed for traders to continue to support the market. |
1) | Beef packer margins are below last year and significantly below the three-year average. Packers may slow slaughter to improve their profits. |
| 2) | Higher cash cattle this week indicates packers did not have sufficient on hand even for reduced slaughter due to the holiday weekend. This could point to higher cash next week. |
2) | There may be some profit-taking Friday ahead of the Memorial Day weekend, which could put some pressure on cattle futures. |
| 3) | Low pork prices should stimulate greater demand at some point as consumers wrestle with higher food prices. |
3) | New lows in hogs kept selling pressure on the market. Packers bid lower this week but were still able to get the hogs they needed. |
| 4) | The hog market is oversold, and some short-covering might take place ahead of the weekend. |
4) | Uncertainty over the impact of Prop 12 come July keeps traders bearish on the hog market. |
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