The week will begin with uncertainty as traders cautiously see the reaction to the Cattle on Feed report. The numbers would suggest futures should see strength to start the week. Hogs should follow though, riding on the strength of Friday.
Cattle: Lower Futures: Mixed Live Equiv $208.68 +0.36*
Hogs: Higher Futures: Higher Lean Equiv: $118.52 -2.69**
* based on formula estimating live cattle equivalent of gross packer revenue.
(The Live Cattle Equiv. Index has been updated to depict recent changes in live cattle weights and grading percentages.)
** based on formula estimating lean hog equivalent of gross packer revenue
Last week was brutal for both cash cattle and futures. There is no doubt cattle futures are substantially oversold, but in this market environment, that does not hold much influence. Lower cash certainly was not totally unexpected, but the magnitude of the decline was unexpected. However, considering the bearish influence of higher grain prices, there was nowhere else for cash to go.
The Cattle on Feed report is now a factor that has been digested over the weekend and will be seen in trade on Monday. There has been a lot of comparing and assessing going on since the report. One idea is that it really is difficult to make a proper comparison to last year due to COVID-19.
While that is a viable assessment, farms and feedlots did not shut down later in March 2020 as many other businesses did. Most of the cattle that were there earlier in March 2020, were still there at the end of the month.
On the other hand, making a comparison back to 2019 might be a more accurate way to determine where cattle numbers are in relation to current demand. The general consensus is that the report was neutral to friendly.
The actual numbers were slightly below the average trade estimates. Those estimates and released numbers are generally what influences the trade. Thus, futures will likely trade higher Monday.