Cattle: Steady Futures: $1 Higher Live Equiv $140.45 +0.92*
Hogs: Steady to $1 Lower Futures: $1 higher Lean Equiv $ 81.85 +2.27**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Initial live cattle futures trade is expected to draw a combination of follow-through buyer support and narrow position-taking. This could create additional market shifts during the morning while future are expected to see some follow-through buyer interest, which helped to post strong gains Monday. The strong upward market support in outside markets is likely to spark some additional trade activity, but the focus on potential technical support and changes in market fundamentals could bring some increased overall activity coming from outside markets. With April live cattle futures moving back to $125 per cwt, some increased buyer support may move back into the complex. Cash cattle trade is undeveloped with traders are looking packers to show increased activity following the lighter trade activity last week. So far, there is no development of bids or asking prices, but this could change near midweek, although early activity Tuesday is likely to still be undeveloped.
The firm support seen in lean hog futures through the trading session Monday is helping to spark some additional buyer support through the nearby contracts. April and May contracts have posted some additional long-term support, which has not been able to change the trend of the market, but traders are looking for longer-term support developing across the market. This could add even more support through the rest of the week, especially if coupled with outside market support. Cash hog markets are expected to be steady to $1 per cwt lower with active trade likely to be steady to 50 cents lower. Packer runs are expected to be 465,000 head Tuesday.
|BULL SIDE||BEAR SIDE|
|1)||Packers are expected to be extremely short-bought through the early part of the week following sluggish trade last week. This could bring some additional support from feedlot managers in order to take advantage of that light activity.||1)||Despite the early-week support in the cattle complex, the inability to push cash cattle trade higher last week may create additional uncertainty about drawing long-term support back into the market.|
|2)||Strong buyer support in nearby live cattle and feeder cattle futures helped to spark some additional underlying support in all contracts. This has moved April futures back to $125 per cwt, which is likely to bring additional longer-term support back to the market.||2)||Feeder cattle still remain near the bottom end of the range despite the triple-digit gains on Monday. This may add even more volatility to the entire market as traders could focus on longer-term market shifts if outside markets move lower.|
|3)||Pork cutout values rallied sharply higher following a strong upward move seen in nearly all primal cuts. This bounce in pork prices following the aggressive turn lower last week could help to spark widespread underlying support through the complex.||3)||Follow-through pressure in cash hog trade through the early part of the week could add even more uncertainty in all hog markets late in the week. Cash trade remains under pressure as packers continue to focus on the pullback in margins over the last couple of weeks.|
|4)||Sharp gains in nearby lean hog futures have caused buyers to quickly move back into the market through the week. Nearby contracts have moved back off of market lows with April futures moving to $70.50 per cwt. This is likely to help spark some underlying commercial support back into the market.||4)||Continued wide price spreads between nearby April and summer contracts is limiting the ability to draw buyers back into the entire complex. Even though prices have moved off of market lows, the concern is follow-through pressure, especially if outside markets work lower in the near future.|
Rick Kment can be reached at email@example.com
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