GENERAL COMMENTS:
Cattle futures were the recipients of strong buying interest Tuesday, resulting in the June and August contracts closing the chart gaps that had remained since Oct. 17. Tight cattle supplies may tighten further as there is evidence of increased cattle sales from some areas facing a feed shortage. After the large price decline in October and November, it was anticipated the top may have been established for the market; but here we are with the June and August closing the gaps and knocking on the door of new contract highs. The strong stock market on Tuesday likely influenced the strength. Boxed beef prices on Tuesday were higher, with choice up $1.39 and select up $1.92. More discussion is surfacing regarding the possibility of reopening the border with Mexico for cattle imports, according to the Secretary of Agriculture Brooke Rollins. There is no set date for any port to reopen, but there is a possibility of another phase in strategy, with the port in Douglas, Arizona, being the farthest from the New World screwworm cases. Further assessment is ongoing.
Hog futures could not hold the earlier strength of Tuesday and succumbed to selling pressure. With this weakness, the potential to close the chart gaps below the market may be accomplished sooner rather than later. The hope the market found a bottom and would renew the uptrend was dashed on Tuesday. Both cash and cutouts were lower, which may put further pressure on the market Wednesday. The National Daily Direct Afternoon Hog report was down $0.34. Pork cutouts fell by $1.32. It is uncertain how many hogs packers will purchase due to the holiday-shortened week, but there are sufficient supplies of market-ready hogs, reducing the need to be aggressive.
| BULL SIDE | BEAR SIDE | ||
| 1) | Feeder cattle futures are poised to break through resistance and move toward regaining the losses from October and November. |
1) | Traders have put a premium back into cattle futures. If cash trade is no better than steady this week, futures may retrace. |
| 2) | The potential for the limitation of an increase in the breeding herd in some areas due to the dryness and wildfires may further tighten cattle supplies. |
2) | Closing the chart gaps and contract highs may be a formidable resistance point that could increase selling activity. This could take place ahead of the three-day weekend. |
| 3) | Hog futures may find buying interest if the chart gaps remaining from Friday are closed. |
3) | The weakness of both cash and cutouts on Tuesday may put further pressure on hog futures Wednesday. Traders are unable to find consistent fundamental support. |
4) |
The hog slaughter pace is not slowing down and higher beef prices may benefit pork demand as consumers shop for value. |
4) | The chart gaps in hog futures are likely to be closed ahead of the long weekend. Lower prices are needed to accomplish that task. |
