The cattle complex traded higher Tuesday in response to a friendly cattle inventory showing the lowest inventory in seven years. The report was seen as having a greater impact during the second half of the year, but it did support the whole complex. Another supportive factor is the winter storm moving across a large section of the country again. This will hinder cattle performance and reduce the movement of cattle to slaughter. Although restricted movement in temporary, the market always reacts to it in the same way consumers react to a storm as they stock up on food supply. The market did not receive any direction from cash Tuesday with reports of only a few sales. It was not sufficient to establish any solid indication of potential. Boxed beef did not perform well with choice down $4.96 and select down $3.05.
Hog futures certainly showed some spread trading between the front-month February and later contracts of October through the beginning of 2023 against spring and summer contracts. Traders were at a disadvantage Tuesday as cash and cutout prices were not released due to packer submission problems. These left traders flying blind likely resulting in the spread trading. The winter storm is a factor in the market as movement may be hindered, which may result in a larger Saturday slaughter.
| BULL SIDE | BEAR SIDE | ||
| 1) | New contract highs were established in live cattle Tuesday, effectively negating the possible head and shoulders top. |
1) | The cattle inventory report is bullish in the longer term, may not have much impact in the near term. Cattle supplies remain readily available. |
| 2) | Feedlots may want to sell and move cattle, but the winter storm may have them for focused on taking care of their cattle. This may result in packers having to bid up to purchase supply. |
2) | Increasing grain prices keep cutting into profit margins, increasing the need for feedlots to move market-ready cattle as quickly as possible. This may keep a lid on higher cash potential. |
| 3) | April and later hog futures made new highs, which will keep traders buying into the market as the trend is your friend. |
3) | Traders began the month with a vengeance, but it may have been overdone to the upside in light of the fact traders had no indication of what cash and cutouts did. |
| 4) | Packers have become more aggressive as demand is strong and slaughter pace is increasing. Even though there were no cash or cutout reports Tuesday, traders anticipated stronger cash. |
4) | Technical traders still see some chart gaps that remain quite a bit lower that will likely be filled at some point. |
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