GENERAL COMMENTS:
Higher cash cattle last week supported the gains in futures contracts. Trade in the South was mostly $2.00 higher on a weighted average of $175 with Northern dressed cattle at $277, up $3.00 for the week. Packers still seem to be light on cattle supply, which will increase the resolve of feedlots to hold for higher cash. Traders may continue to buy into the market as supply and demand fundamentals are positive. Slaughter weights for the week ended Jan. 13 showed all live cattle at 1,396 pounds, down 15 pounds. The steer carcass weights were down 10 pounds at 927 pounds. Further decreases should develop as the impact of the harsh weather is seen. Boxed beef was higher Friday with choice up $1.85 and select up $1.28. The Commitment of Traders report showed funds adding 3,962 long futures positions to live cattle, bringing their net-long positions to 17,372 contracts. Feeder cattle futures showed traders buying 3,298 futures contracts, bringing their net-long positions to 1,561 contracts.
Hogs had a strong week for cash, which provided substantial support to futures. The April and June futures contracts easily pushed through price resistance Friday with stronger cash and cutouts possibly providing further support Monday. The National Daily Direct Afternoon Hog report showed cash up $1.64 with the weighted average at $56.27. Slaughter is back on track again with demand being supportive. Cutouts gained $0.60 on Friday. The combination of higher cash and cutouts should provide further support to begin the week. The Commitment of Traders report showed funds as net buyers of 4,591 futures contracts, bringing their net long positions to 2,492 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Packers need cattle and they may need to increase bids this week as feedlots will hold for higher cash. |
1) | Cattle traders may be cautious to begin the week as futures already have higher cash factored in. |
| 2) | Feeder cattle are poised to move higher and close the chart gaps that remain in the February, April, and May contracts. |
2) | Cattle futures are becoming overbought technically, which could trigger some profit-taking. |
| 3) | Hog futures have pushed through and closed above chart resistance, which may increase the confidence of traders to buy into the market. |
3) | Packers may not be as aggressive this week as hog slaughter is back on track and hogs are available. |
| 4) | Higher cash and cutouts should provide support for futures as traders have become more optimistic. |
4) | Hog futures might be ripe for a price retracement after the large increase last week |
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