GENERAL COMMENTS:
Cattle futures extended gains except for the April and May feeder cattle contracts. The June and August live cattle contracts closed at new contract highs. The April contract gapped higher on the open, leaving the gap to be filled by the end of the month. The JBS plant in Greeley will be operating again today, with contract talks continuing. This did not hurt the market as it will open processing in an already tight market. This is not to say that cash cattle prices will continue to increase, but it is likely to support the market. The demand picture is what comes more into focus as beef prices increase. Will consumers continue to purchase beef as food prices in general continue to increase? A slowing of beef demand moving toward summer could have a significant impact on beef prices. However, the supply of cattle will remain tight.
Hogs found incredible buying support with futures opening higher and never looking back. Traders decided the market was developing support, and both short-covering and new buying interest overtook the market. A fundamental change did not fuel the price rally, but rather the perception that prices are too low given the continued strong processing speeds, indicating good demand. The available hog supply has been the limiting factor for price strength, not because of the lack of demand. The National Dairy Direct Afternoon Hog report did not post a cash price due to a small volume of hogs purchased. Pork cutout values increased by $0.09. Follow-through strength is expected today.
| BULL SIDE | BEAR SIDE | ||
| 1) | New highs in the June and July live cattle contracts keep the uptrend intact. Traders should maintain confidence in the strength. |
1) | High prices cure high prices, and the beef market may be nearing that level as consumers grapple with increasing food prices. |
| 2) | The JBS plant reopening for the time being may result in higher cash again this week as cattle will be purchased for processing. |
2) | Cattle traders may be interested in taking profits on long positions rather than continuing to add new positions at these lofty levels. |
| 3) | The strength of hogs on Monday should see follow-through buying interest today as further short covering may take place. |
3) | The price rebound in hog futures on Monday was technical and not fundamental. This may have limited upside potential. |
4) |
Hog slaughter continues to remain above a year ago, indicating strong demand for pork. |
4) | Market-ready hogs remain plentiful, leaving packers with sufficient supply and limiting the need to be aggressive in the cash market. |
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