GENERAL COMMENTS:
Limited cash trading activity took place last week, leaving the market in a precarious position of uncertainty. It is uncertain over the volume of cattle sales through Friday, as there was little information regarding transactions in the South. However, some sales were reported on Saturday, with some live sales in the North reported from $3.00 to $5.00 higher. This creates an interesting scenario as boxed beef prices were lower on Friday. Choice declined $0.19, with select down $0.23. The renewed increase in the crude oil price may have an impact on demand as consumers adjust to higher fuel prices. The talks breaking down with Iran over the weekend may indicate that higher fuel prices will continue. The Commitment of Traders report showed fund traders increased their net-long position in live cattle by 9,863 futures positions to 129,416 contracts. They added 268 futures contracts to bring their net-long position in feeder cattle to 21,115.
The week had not been kind to hog futures, with the spike higher last Monday being eliminated and then some throughout the rest of the week. Contracts are nearing the previous lows. This level will need to hold, or further liquidation could be triggered. Last week, traders could not find fundamental support to encourage renewed buying in futures. The failure to hold Monday's gains resulted in weakness the rest of the week. Both cash and cutouts showed little strength. However, on Friday, pork cutouts increased by $1.32. The National Daily Direct Afternoon Hog report showed cash down $0.56. Hog slaughter continues to increase, providing a sufficient supply of pork, which seems to mask increased pork demand. Hog runs may tighten over time. The Commitment of Traders report showed fund traders adding 3,204 long futures positions to increase their net longs to 88,726.
| BULL SIDE | BEAR SIDE | ||
| 1) | New contract highs in the April through October live cattle futures should keep buying interest strong. |
1) | It looks like high fuel prices will be around for an extended period of time, as a resolution with Iran may not take place anytime soon. This may impact beef demand. |
| 2) | A higher cash cattle trade with limited cattle movement may result in packers being short bought. |
2) | Cattle futures are overbought, which may result in a market correction at any time. |
| 3) | The continued increase in hog slaughter means demand is improving. This will keep hog supplies current. |
3) | If hog futures are unable to hold support, further liquidation could be triggered. |
4) |
Continued high beef prices and higher prices for fuel and food may reduce demand for beef and increase demand for pork. |
4) | Market-ready hogs are readily available, leaving packers less aggressive in the cash market. |
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