GENERAL COMMENTS:
Cattle futures were whipsawed last week, with various news stories creating volatility. The potential strike at the JBS plant in Greeley seemed to have been digested to some extent. Then, President Trump signed the order to reduce tariffs on 80,000 metric tons of beef from Argentina to increase the volume of trim available to the U.S. market. This took the early strength out of the market that came from cash cattle trading higher in both the North and South. The President signing the agreement with Argentina may not have as much impact as this had been discussed earlier, but it is now to be formally implemented. This may have more of a psychological impact on the market than a physical one and may increase selling in futures today. Boxed beef prices were higher, with choice up $2.08 and select up $4.16. The Commitment of Traders report showed the fund traders adding 7,372 live cattle futures contracts, bringing their net-long position to 111,771. The net-long position in feeder cattle was reduced by 940 contracts to a total of 17,925.
Hog futures closed mixed and near the day's lows. The strength during the day evaporated due to lower cash, cutouts, and likely some spillover weakness from cattle. The National Daily Direct Afternoon Hog report showed cash down $1.19. Pork cutout values declined by $1.50. The slaughter pace remains strong, indicating good demand. This is the last week to trade February futures and options, with the contract closing on Friday. The Commitment of Traders report showed the fund traders adding 13,859 contracts, bringing the total long positions to 123,396.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cash cattle traded higher, indicating beef demand remains strong, and packers need to obtain the cattle to meet that demand. |
1) | The actual signing of the agreement to lower tariffs on 80,000 metric tons of beef trimmings may be sufficient to trigger selling. |
| 2) | The importation of more beef from Argentina may not boost the overall volume of beef available to the market by much. The bullish fundamentals are bigger than that. |
2) | The choppiness of the cattle market last week may indicate a top may be forming in the market for the time being. Liquidation could increase. |
| 3) | Hog futures were not able to hold early strength, likely due to spillover pressure from cattle. |
3) | Hog futures are oversold, and the weakness of cash and cutouts may trigger selling. |
4) |
The uptrend in hog futures remains intact. Traders seem confident over continued strength in demand. |
4) | Packers continue to maintain a strong hog slaughter pace and have little difficulty finding hogs to meet demand. |
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