GENERAL COMMENTS:
Cattle tried to continue the gains from Tuesday but could not hold through the day. It seems some of the optimism of earlier in the week dissipated. There was hope feedlots would be able to see at least steady cash this week, but a few head traded $2.00 lower in the South with some dressed cattle mixed. This was not enough to set a trend, but many times initial trade does set the stage for the week. It does not help that boxed beef has been weakening with choice down $0.51 and select down $0.35 yesterday. More trade is expected to develop today. Weekly export sales will be viewed with interest but may have no impact on futures direction.
Hogs struggled to find support yesterday after moving higher early in the day. Higher cash on Tuesday was not enough to increase buying interest and traders were uncertain over cash and cutouts yesterday. However, packers remained active with the National Direct Afternoon Hog report posting a cash gain of $3.53. Cash has again been higher the first half of the week. Packers needed hogs and bid up to get them. It is likely they will not be very aggressive today. Cutouts struggled with a loss of $0.35. Weekly export sales may show strong international demand. Saturday slaughter is estimated at 57,000 head. Tomorrow is the last day to trade the May contract with June moving to front-month on Monday.
| BULL SIDE | BEAR SIDE | ||
| 1) | June cattle hold a substantial discount to cash with about six weeks remaining for the contract to converge to cash. | 1) | Even with the discount of cattle futures to cash, futures are having a difficult time finding support. |
| 2) | Beef demand should pick up somewhat as the grilling season kicks off this weekend on Mother's Day. | 2) | A few cattle trading at steady to $2.00 lower yesterday does not bode well for the hope for steady to higher cash. |
| 3) | Packers have again been aggressive this week with cash higher the past three days. Supplies may be a bit tighter. | 3) | Hog futures have not been able to find strong buying interest despite cash trading higher so far this week. |
| 4) | Slaughter pace has been decreasing which means either packers are attempting to improve margins or there are fewer market-ready hogs available. | 4) | Cutouts have yet to find solid support with domestic demand remaining lackluster. |
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