GENERAL COMMENTS:
Traders may be cautious the rest of the week as cash is expected to trade lower and the Cattle on Feed report will be released after the close on Friday. Traders may be trying to defend their long positions or taking some profits on short positions to prepare for cash info and the report. The average estimate for the Cattle on Feed report is for on-feed numbers at 99.3% of a year ago. Placements are expected at 103.0%. Marketings are estimated at 102.2%. As usual, there is a wide range for placements ranging from 98.6% to 106.1%. Boxed beef prices were less than stellar on Wednesday with choice down $1.88 and select up $0.05. Packers continue to reduce slaughter and remain less aggressive with purchases. This may have feedlots moving more cattle at lower prices rather than holding for yet again lower prices. Feeder cattle futures failed to follow through on Tuesday's strength, leaving the potential for further weakness.
Hogs were hit hard Wednesday due to sharply lower cutouts Tuesday and weakness again on Wednesday. It is unusual to see pork cutouts drop substantially for two consecutive days. The futures are following the pattern set since the end of last year in which a strong price increase is met with a sharp retracement. Pork cutouts fell $3.95, setting a bearish tone for Thursday. Bellies posted a decline of $16.75, dragging the complex lower. The National Daily Direct Afternoon Hog report showed a gain of $0.19, but that may be the last gain for the week. The sharp decline of futures will be difficult to overcome anytime soon.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle futures may have been overcorrected to the downside ahead of the Cattle on Feed report. The market may rebound somewhat once the report is released. |
1) | The cattle market is having difficulty finding support. The inability to bounce higher may trigger increased selling. |
| 2) | Lower boxed beef prices may again stimulate demand. Lower cattle supplies will be around for a while. |
2) | The weakness of boxed beef indicates demand has slowed and lower prices may be needed to stimulate demand. |
| 3) | Hog futures may be following the pattern seen since December. A sharp decline will be met with renewed buying interest as strong pork demand should continue. |
3) | Weekly hog weights are 1.6 pounds higher than a year ago at an average weight of 289.6 pounds. |
| 4) | Weekly hog weights declined by 0.4 pounds from the previous week. Declining weights may tighten supply. |
4) | April hog futures gapped lower and closed the chart gap remaining from Feb. 5. Follow-through selling is expected due to the weakness of cutouts |
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