Cattle Aim Higher After Monday Turnaround

Live cattle futures seem to be headed higher after finishing up on Monday amid speculative buying, overcoming early pressure from a bearishly construed monthly USDA Cattle-On-Feed report.  June and Aug showed the most pressure early based on the weight distribution of placements.\r\n   Market contacts say live cattle found chart support near Friday’s lows.  Further buying took contracts above key personal chart points, where some believe further speculative buying could arise today.\r\n   Renewed speculative buying came in spite of the CFTC’s Commitment-Of-Traders report showing speculative net long positions were at a record high last week.\r\n   Futures appeared to be trying to retake ground lost in Thursday’s sharp, pre-report drop.  Further gains today could add buying interest if prices rise above a series of key moving averages.\r\n   However, commercial buyers may be harder to convince, so gains today could be hard fought.  Wholesale beef prices, while up on Monday, lacked the excitement of previous Mondays, even though select product was up smartly.  \r\n   Select’s may reflect only average weekend retail beef movement and a late-month shift to cheaper cuts as monthly spendable incomes decline.\r\n   The USDA reported choice boxed-beef Monday at $241.12 per cwt, up $0.96 and select at $235.93, up $2.27.  The choice/select spread narrowed to $5.19, and the number of fabricated loads sold into the spot market was only 86.\r\n   Slaughter Monday was near a week ago at 115,000 head versus 116,000 the previous week but it was well above the 106,000 of a year ago.  A stronger slaughter on Monday is sometimes a sign of packer demand for cash cattle, and futures speculators appeared to run with it.\r\n   The CME Feeder Cattle Index for the seven days ended Friday was $176.66, up $2.73 while the March futures contract closed Monday at $176.70, up $1.67.\r\n\r\nHOGS REMOVE PREMIUM WITH LIQUIDATION\r\n\r\n   Gains in live cattle futures Monday may have been capped by long liquidation in the lean hog pit after a higher open.  Hogs closed sharply lower with speculative long liquidation touted as the main driver after futures had gotten well ahead of cash values, even though cash continues to rise.\r\n   Hog slaughter was said to be above expectations at 415,000 head, but possibly temporary as farmers may be trying to get ahead of their marketing schedule in preparation for spring fieldwork.\r\n   Overall, the market appears to have a bullish long-term tone with Porcine Epidemic Diarrhea virus continuing to kill piglets.  \r\n   However, technical indicators prompted some to take long profits and re-evaluate their market positions.\r\n\r\nUS WEATHER FORECAST WARMER, WETTER IN THE EAST\r\n\r\n   The latest US weather forecasts finally show some warming next week with rain in the eastern half.  This will delay spring fieldwork even more and could support corn and soybean futures amid worries of a late season and its negative effect on yield.\r\n   The Plains, however, are expected to see much less rain than the eastern half, further stressing dry Hard Red Winter wheat fields and lowering yield potential.  May Kansas City wheat Monday closed sharply higher at a new contract high as dry-weather worries mounted.\r\n   Besides the weather forecasts, support came from reports of Russian troop buildup along the Ukrainian border.  Traders worry that an incursion into Ukraine would disrupt export shipments of wheat, corn and barley.\r\n   Increasingly, the USDA’s quarterly Stocks report and Planting Intentions report, both scheduled for Monday, loom as increasingly important to traders this week.  Position-squaring could be the order of the week with only a few caveats from weather and international markets to nudge it in any direction.\r\n\r\nIN OUR OPINION\r\n\r\n–California still in severe drought, with calves going to feedlots much earlier than normal – 300-400 pounds instead of 500-600 pounds\r\n–California hay prices out of control as dairies, beef cattle owners compete for dwindling supply\r\n–Deep eastern US frost could delay planting or cause flooding\r\n–Summer hogs may not be as short as fall hogs with summer futures contracts weaker than fall months\r\n–Just finishing the largest decrease in finished cattle in history, down 6-7%\r\n