Significantly lower grain prices Monday spurred aggressive buying of cattle futures. Grain futures are not showing continued follow-through Tuesday. This may temper further aggressive buying of cattle futures. Hogs have seen lower prices for the past two days. Tuesday will be key to the extent of the price correction.
Cattle: Steady Futures: Higher Live Equiv: $226.93 +$2.34*
Hogs: Steady Futures: Mixed Lean Equiv: $119.75 -$0.63**
* 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
Cattle finally found the support they needed from significant pressure on corn prices Monday. One day of the movement in futures contracts does not indicate a change in underlying cash, but it does provide some hope feed prices may become a bit less expensive. With corn prices a bit less expensive, it may provide feedlots with some ability to hold out for higher cash prices.
However, it has just been one day and it may not translate yet into less expensive grain from feed suppliers. Grain prices will need to be consistently lower for an extended period. The upcoming World Agricultural Supply and Demand report and weather forecasts can change that quickly. There were no cash bids or offers Monday, but it is expected packers will not bid higher.
Boxed beef was very strong again Monday as demand is on fire. Dressed cattle weights were down 2 pounds last week from the previous week, averaging 828 pounds, but up 8 pounds from the same week a year ago. The Commitments of Traders report showed funds as net sellers of 6,030 futures contracts, bringing their net-long positions down to 48,865 contracts.