GENERAL COMMENTS:
The January feeder cattle contract went off the board Thursday at a record high $281.90. However, later contracts suffered losses averaging $2.50. Live cattle showed similar losses with April taking the brunt of it with a loss of $3.45. The fundamentals did not change and even were better from the cash standpoint. Cash traded $6.00 to $7.00 higher in the South and $2.00 higher in the North. This should continue Friday as packers need to finish buying for the week. Packers continue to pull back on slaughter but to no avail. Cattle weights are higher, making up for the lighter slaughter numbers. Boxed beef fell Thursday with choice down $3.06 and select down $4.77. The Cattle Inventory report will be released Friday afternoon, providing an indication of the status of the beef and dairy herds.
Hog futures found support Thursday with all contracts closing higher. The gains were not large -- but gains, nevertheless. The head-and-shoulders bottoms in the June and July contracts suggest further upside potential if technical traders have their way. The limiting factor may be the choppiness of cash and cutouts. The National Daily Direct Afternoon Hog report showed cash down $2.87. Pork cutout declined $0.38. Some support stemmed from pork export sales totaling 33,600 metric tons (mt), indicating current prices are not reducing international interest. Saturday slaughter is estimated at 150,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | The jump in cash cattle prices should bring traders back into the market as futures are below cash. | 1) | The large drop in boxed beef prices could indicate beef prices may have reached a top or may be near a top. Beef prices will not go up forever. |
| 2) | Feedlots are in control as tight supplies keep them asking for more and packers need to pay. | 2) | The Cattle Inventory report may show more cattle than expected as there may have been a slight rebuilding of the herd. |
| 3) | Traders remain bullish on the hog market in the anticipation cash and cutouts will trend higher. The average weight last week was 290.8 pounds, down 0.9 pounds from the previous week and steady with a year ago. | 3) | Traders need to see consistent strength in cash hogs and cutouts to push futures through technical resistance and increase buying interest. |
| 4) | The head-and-shoulders bottoms on the June and July contracts suggest further upside if the pattern is to be fulfilled. | 4) | Hog supplies have not shown any signs of tightening. Packers have a sufficient supply of market-ready hogs. |
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