GENERAL COMMENTS:
April live cattle futures tried to close the chart gap but fell back before accomplishing the task. The higher cash trade was not enough to break futures prices out of the sideways trading range they have been in. Southern cattle traded $2 higher at $185 and Northern dressed cattle were $4 higher, which should have provided support. However, futures had that already factored in. This sets a good potential for cash this week as the packers need to purchase cattle to satisfy demand. Slowing the slaughter pace has improved boxed beef prices, but it has not backed up cattle in the country. Feedlots scored a victory last week and will attempt the same this week. Boxed beef prices were higher with choice up by $0.43 and select up by $1.17. The Commitments of Traders report showed funds increasing their long live cattle futures positions by 5,076 contracts to a net-long position of 64,048 contracts. Funds increased their long feeder cattle futures positions by 1,394 contracts to a net-long position of 10,479 contracts.
Hog futures were able to hold well Friday, keeping the uptrend intact. The National Direct Afternoon Hog report showed cash declining by $0.99 with a weighted average of $76.18. The recent pattern has been that cash prices have been stronger to begin the week. This may carry over again this week. Demand has been strong with futures trending higher and holding the gains. Pork cutouts gained $0.96, which should continue to provide support to the market. USDA raised its estimates for hog prices for the year by $1 to $3 due to the change in fundamentals from the previous report. Hog slaughter was lower last week with most of it due to plants having mechanical problems. However, there is some indication hog runs may also be tightening. The Commitments of Traders report showed funds adding 2,509 futures contracts to bring their net-long futures position to 65,402 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Live cattle futures pushed above chart resistance but did not hold. However, this opens the way for another move higher as resistance was penetrated once. |
1) | The reversal of April live cattle futures Friday without being able to close the chart gap may indicate a level where a large amount of sell orders are placed. |
| 2) | The chart gap in April live cattle was not completely closed Friday. Futures will likely make another run higher to close the gap. |
2) | Cattle futures already have higher cash factored in. They may leave the market in the sideways range for a time. |
| 3) | Cash hogs continue to move higher, indicating good consumer demand as packers continue to pay more to obtain what they need. |
3) | Pork cutout prices continue to remain choppy. This may limit packers' interest this week and thereby limit the strength of futures. |
| 4) | The price uptrend in hog futures remains intact and may retest the highs of last week. |
4) | Hog weights continue to run above a year ago, which requires fewer hogs to provide the same tonnage. Sufficient supply is available to the market. |
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