Look for the cattle complex to open solidly higher, supported by higher feedlot sales and midweek short-covering. Lean hog futures are likely to begin with mixed prices thanks to follow-through buying on one hand and defensive fundamentals on the other.
Cattle: Steady-Firm w/Tues Futures: 50-100 HR Live Equiv $149.40 – .23*
Hogs: Steady-$1 LR Futures: Mixed Lean Equiv $ 79.68 – .25**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
While we thought there was a chance of early-week business in feedlot country if attractive basis opportunities became available (e.g., sharply lower futures and near-steady packer bids), the surfacing of cash bids on Tuesday as much as $1 higher than last week came as quite a bullish surprise.
Light-to-moderate trade volume developed in several states with the largest number of sales evident in the South. Look for weekly business to build further Wednesday and Thursday with prices steady/firm with the range established on Tuesday.
The balance of showlists should be priced around $129 plus on a live basis and $206 to $207 in the North. Cattle futures seem likely to open higher Wednesday, boosted by residual short-covering and cash premiums.