GENERAL COMMENTS:
Live cattle contracts traded at lower prices for a period of time Monday nearly testing technical support and then rebounded. Feeder cattle were not under quite as much pressure but did follow a similar pattern. Boxed beef prices closed mixed with choice down $0.56 and select up $0.92. This may have tempered some of the selling. However, there was no direction from cash as usual on a Monday with the potential for nothing Tuesday. With the overall weakness of boxed beef and the cash action last week, trade is likely to develop at steady money this week. Feedlots want more but packers may be in a better position due to having some cattle already contracted ahead. The on again, off again situation in the Ukraine will continue to provide volatility in outside markets that may influence cattle futures trading. Corn future reacted to the information released that Russia was going to invade on Wednesday. Now corn futures are under pressure due to a change in the news from that region. Lower corn futures may provide some support to cattle. The Commitment of Traders report showed net buyers of 12,570 contracts changing their net long positions to 81,842 contracts.
Hogs received positive news of higher cash on the National Direct Afternoon report with an increase of $4.15. This was offset to some extent due to pork cutouts $1.98 lower. It appears liquidation may have run its course for now. April is the front-month contract carrying a large premium to cash which may be difficult to maintain. Slaughter pace is still struggling to get back up to where it should be, but it is improving. It is unclear whether demand for meats may increase if there are further cases of the highly pathogenic avian flu that has been found in a few flocks in the U.S. and significant number of birds could be destroyed. We certainly hope not, but this could have an impact on pork and beef demand. The Commitment of Traders report showed net buyers of 8,704 contracts bringing their net long positions to 78,672 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | The pressure on corn overnight might result in traders being friendly to cattle futures. |
1) | Packers have some cattle already forward contracted, which may leave them less willing to bid up this week. |
| 2) | Cash is expected to trade later in the week, which may improve the chances for some higher prices to develop. Lower corn prices may provide feedlots confidence to hold out. |
2) | Feedlots may be willing to move cattle at even money this week as high feed prices continue to put a strain on profitability. |
| 3) | The liquidation phase seems to have run its course, which may bring buyers back into the hog futures market again. |
3) | April hog futures have a large premium to cash which may result in price having a difficult time moving higher. Expectations might be higher than reality. |
| 4) | Slaughter pace is increasing, and packers need hogs. Tightening supplies may keep them bidding more aggressively with the higher trend in cutout prices. |
4) | Hog futures will need to find support or further weakness may unfold. Price may have increased too far, too fast and may need to decline further to correct an overbought market technically as well as find solid support where buyers will feel comfortable to step back in. |
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