The cattle complex was able to close mostly in positive territory Friday after the previous two days of selling pressure. The market had adjusted to the higher cash cattle trade. Cash in the South traded $6.00 to $7.00 higher with dressed cattle in the North up $2.00, which provided some good support under the market going into the weekend. However, prices had declined from where they were earlier in the week prior to cash cattle trading. The market had to correct to get in line with cash. Boxed beef prices were higher with choice up $.20 and select up $1.17. Slaughter levels were lower than they were the previous week and a year ago. Packers are trying to limit slaughter to try to back up some cattle in the country. The feedlots are in the driver's seat and continue to hold cattle, causing packers to bid higher to get enough cattle for slaughter. The cattle inventory report was bullish as it showed lower cow numbers and lower heifer numbers than a year ago. That should keep cattle supplies somewhat tight for the next one or two years unless we see something else that has major impact on the market. We may not see cattle prices decline to any great extent other than price retracements, but the downside may be limited to some extent. Feeder cattle should remain supportive as there is good demand for feeder cattle and calves in the country. Early expectations for cash this week are for steady to higher. Feedlots will hold for higher cash again and hold cattle over if they do not receive the prices they want. The Commitments of Traders report showed fund traders buying 6,885 futures contracts in live cattle, bringing their net-long position to 156,909 -- a new record long. Funds sold 496 feeder cattle futures, reducing their net long to 29,375.
Hog futures struggled Friday with the April contract taking the brunt of it. There is concern over ongoing demand for pork. We have not been able to see consistency in underlying cash and pork cutouts. As long as that uncertainty continues, we may see a choppy market and the upside may be somewhat limited. The National Daily Direct Afternoon Hog report showed cash at $2.81 Friday with a weighted average of $83.43. It is unusual to see cash hogs that strong on a Friday. Monday might see some lower cash trade as the packers assess weekend demand. Pork cut outs gained $1.82. Price retracements will probably be bought into by the funds as they are looking at it for the long term. The Commitments of Traders report showed the funds reducing their net-long position by 213 contracts, bringing their net position to 91,937.
| BULL SIDE | BEAR SIDE | ||
| 1) | The Cattle Inventory report should continue to support the market for the rest of this year and likely all of next year. | 1) | The cattle market is overbought and moving closer to a possible price correction. The funds are holding a record-long cattle futures position. |
| 2) | Cash cattle are expected to be higher this week due to continued tight supplies. Feedlots are in control and are willing to hold cattle if they do not receive the prices they ask for. | 2) | Feeder, cattle imports are resuming from Mexico. There will be stricter protocols for testing before they will be able to come over the border. That could limit the upside potential for cattle in the near-term, possibly triggering some selling. |
| 3) | Higher cash and cutouts on Friday may provide support Monday and possibly see further gains this week as it seems hog supplies might actually be tightening. | 3) | Hog futures closed below support Friday, which could increase the selling interest from traders as they try to take some profits ahead of a possible further price decline. |
| 4) | The price declines in hog futures Friday might have been a price retracement with traders willing to buy the break. | 4) | Cash hogs are expected to be lower, as is usual for a Monday. Packers may wait to see how the weekend demand was before purchasing hogs more aggressively. |
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