GENERAL COMMENTS:
The Cattle on Feed report provided support to cattle futures Tuesday. Feeder cattle were the recipients of strong buying interest from traders. The August contract gained over $4.00 with later contracts not far behind. Live cattle futures did not exceed the highs last week, but the market is supported with June futures holding a discount to cash and continued gains in boxed beef. Choice cuts gained $1.67 with select cuts up $1.71 on Tuesday. Strong demand should keep packers aggressive with slaughter and buying in the country. This will give feedlots confidence to hold for higher cash again this week. Feeder cattle pushed higher as the report showed numbers will remain tight.
Hog futures cannot find sufficient buying interest to support the market. The concern over demand hangs over the market like a dark cloud. However, cash and cutouts showed nice gains Tuesday as retail needed to restock shelves after the holiday weekend. It is uncertain whether the strength will continue and turn the trend higher, but it should support futures Wednesday. The National Direct Afternoon Hog report showed cash up $1.19 with a weighted average price of $87.83. The packers wanted to purchase hogs early due to the holiday-shortened week. Cash is expected higher Wednesday as packers obtain the desired number of hogs for the week. Cutouts showed substantial strength with a gain of $4.26. Gains were seen for all primal cuts except butts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Consumer demand remains strong which will support the cattle market. Boxed beef prices continue to increase, keeping the packers aggressive. |
1) | The continued higher beef prices may cause consumer resistance due to higher overall food prices. The cure for high prices is high prices. |
| 2) | Feedlots will hold for higher prices again as packers purchase for immediate needs and purchase ahead to maintain slaughter. |
2) | Once store shelves are restocked, boxed beef prices may decline as temperatures increase and consumption decreases. |
| 3) | Strong cash hogs and cutouts Tuesday should generate buying interest in futures at these lower prices. |
3) | Hog futures made new lows again Tuesday, keeping the downtrend intact. Traders are unwilling to step in to purchase aggressively. |
| 4) | The trend may be changing for hogs which could trigger short-covering in the extremely oversold futures market. |
4) | The June hog contract closed below the low set in February which may result in further technical selling. |
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