Lean hog contracts should open higher, supported by short-covering and impressive cash and product developments. Look for the cattle complex to open lower, checked by residual selling and lower feedlot sales.
Cattle: Lower Futures: 50-100 LR Live Equiv: $150.16 – .05*
Hogs: $1-2 HR Futures: 50-100 HR Lean Equiv: $ 79.32 + .69**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Cattle buyers were successful in generating light to moderate trade volume in Kansas and Nebraska by using sharply lower bids (i.e., $116 to $117). To be sure, many feedlots resisted such a severe price break. But packers may have purchased enough stock to at least put a cap on price potential for the week.
Time will tell, but it may take both higher cutouts and a meaningful board recovery for feedlot managers to win greater cash stability Wednesday or later this week. Live and feeder futures should open moderately lower, pressured by follow-through selling and negative cash potential.