Grain markets decidedly mixed on Thursday morning
Recent news concerning the livestock and meat markets has offered CME live cattle traders little apparent cause for optimism. From Russian threats to restrict its red meat imports, to sliding cash and wholesale values and to the seemingly negative implications of pre-report surveys published ahead of the Friday Afternoon USDA Cattle on Feed report, the latest information has not been supportive. We should also point out that nearby futures remain at substantial premiums to the latest cash values despite the recent CME losses. Thus, the modest Chicago gains posted Thursday morning look rather impressive. On the other hand, we would warn that the early-January cattle futures breakdown looks very much like a huge ‘bear flag’ formation on the charts. Such patterns often presage a follow-through breakdown of similar size. We cannot say we expect such a move, but we worry about that possibility. February cattle had gained 0.22 cents to 126.00 cents/pound around midsession Thursday, while April was up 0.07 cents to 130.52.
Hopes for seasonal strength seemed to support CME lean hog futures again Thursday morning, with traders very likely focusing upon cash market strength at this juncture. That is, surging cash prices have actually pushed the CME lean hog index to a premium over nearby futures. For example, the exchange-calculated cash equivalent is expected to reach 87.78 cents/pound Friday morning, which means late-morning quotes for nearby February futures remained below the spot value. Moreover, the hog/pork complex has a history of rising seasonally into mid-February, so traders are probably justified in thinking the February future enjoys significant upside potential. February hogs had jumped 1.00 cent to 86.97 cents/pound just before the lunch hour, while June futures climbed 0.70 cents to 96.70.
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