Packers and feedlots are holding out with each one hoping the other will blink first. The expectations are for cash to trade lower as the packers seem to be in a better position and may not need to be aggressive. With the Cattle on Feed report looming today, it is unlikely futures will see much movement one way or the other. The report tends to show surprises that impact the market. The trade estimates are for On-feed numbers on April 1st at 102% of a year ago. Placements in March are expected at 92.1% with marketings at 88.2% of a year ago. The trade estimates for placements have a much narrower range of expectations than the past few reports with a range of 89.3% to 94.7%. Boxed beef prices showed further weakness with choice down $1.10 and select down $1.61.
Hog futures struggled on Thursday with June retesting technical support from Monday. Thankfully, prices bounced to end the day with only moderate losses. Weekly export sales were not as good as hoped and were a marketing year low at 21,800 MT. However, domestic demand continues to do well with packers remaining aggressive on Thursday with the National Daily Direct Afternoon Hog report showing a $0.65 with the weighted average at $89.78. Along with that, cutouts gained $0.41. The packers are likely done for the week and should have sufficient purchases to maintain the elevated slaughter pace. Saturday slaughter is estimated at 62,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | If placements on the Cattle on Feed report are below the average trade estimate, futures may push higher next week. |
1) | The Cattle on Feed report has been notorious for being bearish in at least one category which may result in some liquidation ahead of the report. |
| 2) | Both packers and feedlots have dug in their heels which could result in steady cash. If cash were to trade steady with last week, futures would see further gains. |
2) | Boxed beef prices continue to show weakness possibly indicating consumer demand is declining due to high food prices. |
| 3) | Weekly pork export sales were a marketing year low, but packers maintain a strong slaughter pace with higher cash which indicates overall demand remains strong. | 3) | Packers are likely finished buying hog for the week resulting in lower cash. This may keep upside futures potential limited. |
| 4) | Hog futures rebounded from support on Thursday and could see further gains today as technical traders may have more confidence to buy into the market. | 4) | Higher pork prices may have reached a consumer threshold. This may limit further strength with summer contracts already having higher prices factored in. |
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