Ag futures seemed to bounce from oversold levels Monday
Despite likely industry disappointment with cash cattle trading last Friday, when prices ranged between 128.00 and 128.50 cents/pound, CME traders pushed nearby futures slightly higher Monday morning. The fact that packers got few takers at the higher levels may have discouraged some, but others in the cattle/beef industry may be expecting a wholesale price advance to push country cattle prices higher. That is, prospects for moderately improved beef demand and seasonally slowing production could push the wholesale market significantly higher during the coming weeks, which in turn might boost fed cattle prices substantially. On the other hand, nearby futures are already anticipating considerable first-quarter strength, so a cash advance is already required to support nearby futures at current levels. February cattle rose 0.05 cents to 133.00 cents/pound on the day, but April slipped 0.07 cents to 136.70.
Lean hog futures are also trading at substantial premiums to cash equivalent values as the swine industry anticipates a seasonal advance through mid-February. That is, pork demand traditionally improves after the first of the year, while hog supplies and pork production decline from early-winter highs. The mixed nature of Monday morning trading suggests the industry is wondering whether the implicitly bullish forecasts being made by nearby futures are justified. Much may depend upon the strength, or lack thereof, exhibited by fed cattle prices during the coming weeks. The technical situation also seems rather clouded. February hogs advanced just 0.07 cents to 86.40 cents/pound, whereas the June contract slipped 0.20 cents to 98.55.
Ideas that the USDA will modestly reduce its estimate for the 2012 U.S. cotton crop seemed to boost white fiber prices at the ICE Monday. Wire service reports also cited concurrent slippage suffered by the U.S. dollar, since a weaker greenback lowers the relative cost of American products. The strong March futures bounce from technical support associated with its 40-day moving average very likely sparked fresh buying as well. But while the situation seems supportive of further short-term gains, traders may also be reluctant to sponsor the long side of the market ahead of the Friday morning USDA reports. March cotton advanced 0.65 cents to 75.70 cents/pound Monday, while December edged just 0.11 cents higher to 79.21 cents/pound.