Live cattle futures witnessed an initial upward surge on Monday, reaching new highs. However, resistance came into play, leading to liquidation as traders decided to take some of the premium out of the market. The establishment of cash trade this week is expected to have an impact. The Cattle on Feed report is due on Friday, but it didn't significantly influence trading in the early days. Boxed beef prices showed mixed trends in the morning report but closed higher, with choice up by $0.98 and select by $5.71, potentially providing stability on Tuesday.
Unraveling the Dynamics of Livestock Futures Markets
Cattle Futures
Live cattle futures may have established a double-top technically, which could keep the market under pressure in the near term. Cash cattle are expected to trade no worse than steady this week, providing support. Feedlots hold the upper hand as they will hold cattle over if the desired prices aren't met. Cattle supplies are manageable with reasonable and plentiful feed.
Traders might be less inclined to buy aggressively this week due to the upcoming cash cattle trading and the Cattle on Feed report. The fact that 32% of the cattle traded last week were for deferred delivery gives a different perspective on the packers' potential actions this week.
Hog Futures
Hog futures followed a similar pattern to cattle on Monday, with a strong opening followed by a decline as buying interest dried up. The technical action could have formed a head-and-shoulders top, potentially triggering further long liquidation. The National Direct Afternoon Hog report showed a cash increase of $0.46, and the packers aim to do business earlier to secure supplies for the week and the holiday. Pork cutouts gained $0.92, which may stabilize futures on Tuesday but may not reverse the trend.
Hog supplies are not as large as anticipated and are not causing a backup in the market, supporting prices and limiting downside risk. However, hog futures may be forming a head-and-shoulders top, which could lead to more liquidation before the end of the year, a strong technical pattern.
For our next livestock update, visit our Midday Livestock comments between 11 a.m. and noon CST. Stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.
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