GENERAL COMMENTS:
Cattle futures closed on Thursday, posting six days of consecutive gains. Traders anticipated higher cash trade, and they were rewarded. Packers had to step up to purchase cattle, resulting in Northern dressed cattle trading as much as $13.00 higher, with southern live cattle at $9.00 higher. Boxed beef prices on Friday were lower, with choice down $1.80 and select down $1.51. The margins that packers gained over the past few weeks disappeared, rendering their efforts to slow the cattle slaughter useless for the long term. The cattle supply is just too tight and demand remains strong. Workers at one of the nation's largest meatpacking plants in Greeley have agreed to return to work and halt a three-week strike after negotiations are set to resume, according to an announcement by labor union representatives on Saturday. The Chinese government confirmed foot-and-mouth disease in two herds, and it was reported on April 2 that local governments in Xinjiang and Gansu implemented culling and disinfection measures following the discovery. The Commitment of Traders report showed the fund traders adding 11,960 long futures positions to increase their total long positions to 119,553. They added 1,285 long feeder cattle positions, moving their total long positions to 20,847 contacts.
Hog futures could not hold the slight gains from Wednesday, but turned lower to close the chart gaps that remained from the previous Friday. Whether that will generate technical buying interest or contracts will revisit the lows remains to be seen. The National Dairy Direct Afternoon Hog report on Friday showed cash down $0.97 on low trading volume. Pork cutouts jumped $1.76, with most of the strength seen in bellies, posting a gain of $6.04. Cash activity may be light today and may result in packers possibly not releasing cash prices until Tuesday. The Commitment of Traders report showed fund traders reducing their long futures positions by 8,248 contracts, reducing their net-long positions to 85,522.
| BULL SIDE | BEAR SIDE | ||
| 1) | Significantly higher cash cattle trade should support the market. Cattle supplies are tight, and reducing slaughter is not changing that. |
1) | Live cattle futures are overbought and may be ripe for a price correction. |
| 2) | New contract highs in live cattle futures may generate further aggressive buying interest, as further short covering may be triggered. |
2) | The surge in cattle prices may be short-lived if demand is impacted and boxed beef prices decline. |
| 3) | The weakness in hogs on Thursday may have been influenced more by positioning ahead of the extended weekend rather than a fundamental influence. |
3) | Hog futures close the chart gaps and may retest the recent lows as traders will be cautious over demand. |
4) |
Hog futures closed the chart gaps on Thursday, which may increase buying interest by technical traders. |
4) | Traders continue to search for consistency in cash and cutouts, but have yet to see support from either. |
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