Lean hog contracts are set to open higher, supported by positive fundamentals and follow-through buying. The cattle complex should also open with a firm undertone thanks to residual buying interest and cash premiums.
Cattle: Steady-$2 LR Futures: 50-100 HR Live Equiv: $144.45 + 0.15*
Hogs: $1-2 HR Futures: 50-100 HR Lean Equiv $ 89.36 + $1.76**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
As far as we can tell, relatively few steers and heifers traded last week with buyers and sellers haven’t great difficulty in finding terms of compromise. A limited number sold in the South late Friday at $112-113, $2-3 lower than the previous week. Needless to say, it will be very interesting to see what develops this week given a strange combination of larger showlists and short bought packers.
Having said that, activity today should be limited to the distribution of new showlists. Live and feeder futures seem set to open moderately higher based on follow-through buying and cash premiums.