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Mixed trading activity ahead of the report

Beef: Steady Futures: Mixed Live Equiv: $196.36 – $1.19*

Hogs: Lower Futures: Higher Lean Equiv.: $117.81 – $1.38**

*Based on a formula estimating the equivalent of live cattle to packer gross proceeds. (The Live Cattle Equiv. Index has been updated to reflect recent changes in live cattle weights and grading percentages.)

** Based on a formula estimating Lean Hog ​​Equivalent of Gross Packer Sales.

Live cattle just failed to attract enough buyer interest Thursday to pull futures into positive territory. The goal seemed to be to close the chart gap remaining since last week, but once that was achieved, selling continued as stops were triggered. On Friday, traders will be staring at the Cattle on Feed report, which will be released after the close. This could keep trading activity subdued ahead of the weekend. Live cattle in June have one trading week left and it is indeed confusing that futures are below cash. This week was interesting in the cash market as Southern cattle traded consistently up to $2.00 lower than the previous week. However, the dressed northern cattle rose $2.00 to $4.00 on Thursday as packers stepped on the plate. Boxed beef was lower again down $1.91 on selection and $1.05 on selection. Cold store beef totaled 519.8 million pounds in May, up 25% from a year ago.

Hog futures failed to find support on Thursday, eliminating last week’s gain. Traders were disillusioned with the slower pace of slaughter and the uncertainty of demand. Cash was weaker as the National Direct Afternoon Report showed a loss of $1.63. Clippings declined $1.38. It is interesting that the belly stocks were at times significantly lower than in the previous year and the bacon prices were significantly higher. May’s Cold Storage report showed inventories at 56.4 million pounds, up 55% from a year ago. In fact, total pork inventories are the highest since April 2020. Weekly export sales are released Friday morning and must be good. The Saturday slaughter is estimated at 20,000 head.

bull side BEAR SIDE
1)

June cattle futures are at a discount to cash as there is still a week to trade. Futures should pull higher.

1)

The Cattle on Feed report may continue to trade mixed on Friday as traders are unsure of what the report will show.

2)

The rise in dressed beef money shows that the packers needed cattle to meet demand and they had not bought enough for the week. This should support futures.

2)

Beef in cold storage has increased significantly year-on-year, which seems to indicate lower demand.

3)

Hog futures are trading in a sideways range with Thursday’s sale keeping the market in the range. Futures are expected to recover somewhat as selling may have been overdone.

3)

Thursday’s selling of hog futures may have been triggered by the futures’ inability to move higher through chart resistance on Wednesday. Traders took profits and stops were hit.

4)

Another week of strong export selling could bring support back into the market on Friday as well as some short coverings into the weekend.

4)

The pace of slaughter remains below last year’s level, leaving sufficient supply available to meet demand.

**

For our next Livestock update, please visit our noon Livestock Comments between 11:00am and 12:00pm CST. Also, follow our Quick Takes throughout the day for regular updates on the futures markets.

Robin Schmahl can be reached at [email protected]

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