Cattle: Steady Futures: Mixed Live Equiv: $219.90 +1.59*
Hogs: Higher Futures: Higher Lean Equiv: $118.27 +1.20**
* based on formula estimating live cattle equivalent of gross packer revenue.
(The Live Cattle Equiv. Index has been updated to depict recent changes in live cattle weights and grading percentages.)
** based on formula estimating lean hog equivalent of gross packer revenue
Live cattle futures seem to be leading the charge lower with the fall of the June contract Monday. There was not much for the cattle complex to go on as grain prices were somewhat benign with the exception of the July corn contract. The market is waiting for some cash price direction but will likely need to wait until the middle of the week. This will keep futures in a sideways pattern. There is hope feedlots will hold out for at least steady cash, but traders were not convinced that will happen. Packers will not need to be aggressive as they already have cattle purchased ahead for this week. The positive aspect of the market is demand. Boxed beef was nicely higher Monday, but that money seems to be going into packer's pockets rather than to the beef producer. No bids or offers were listed Monday. The Commitment of Traders reports showed funds as net sellers of 16,424 contracts, bringing their net longs to 54,895 contracts.
Hog futures continue to reach for the sky with nearby futures moving quickly and easily over $112 Monday. Even though cash was a bit lower on the National Direct Hog report, traders did not bat an eye focusing on market supplies that seem to be tightening more quickly than anticipated. At these lofty prices, consumers continue to demand pork and packers need to find it. Traders were anxiously waiting for trading to begin Monday resulting in June, July and August contracts gapping higher. There could be some back and fill action Tuesday or likely at some point during the week. The Commitment of Traders showed funds as net sellers of 2,129 long positions and are now net long 71,117 contracts.
|BULL SIDE||BEAR SIDE|
|1)||Cattle futures held well Monday with the exception of June. There is the possibility of cash remaining steady this week.||1)||Packers have cattle purchased ahead and may set bids lower this week hoping feedlots will need to move more cattle and take the lower bids.|
|2)||Strong boxed beef might push packers to be more aggressive in procuring cattle for future slaughter as the numbers this week will be absorbed rather quickly.||2)||Live cattle futures remained in the sideways range Monday and may continue to do so Thursday without any cash direction.|
|3)||Hog futures are in a strong uptrend, supported by strong demand for pork and tightening supply. Price breaks continue to be buying opportunities.||3)|| |
June, July and August hog futures contracts have a price gap under them left at the open Monday. Those gaps might be filled sooner rather than later.
The strong start to the week may be an indication as to price direction and trader interest for the rest of the week. Traders have intensified their desire to buy the market.
|4)||Hog futures have become quickly overbought and are in need of a price correction. Any minor bearishness may trigger significant selling.|
For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. Also, stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.
Robin Schmahl can be reached at firstname.lastname@example.org
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