Improved S. American forecast hardly deterred grain markets bulls
Cattle futures posted a surprisingly weak reaction to Wednesday morning news of cash trading 3 cents higher than benchmark levels reached last week. Still, given the persistent strength exhibited by the cattle/beef complex since late 2010, CME traders were probably prepared to push nearby futures significantly higher. We tend to blame persistent wholesale weakness for their inability to do so, especially after seeing the decline suffered Thursday. The fact that fed cattle exiting feedlots outweigh their counterparts from early 2012 by over 20 pounds/head may also be playing a role in the ongoing futures weakness, since that increases beef production commensurately and suggests market-ready supplies are relatively plentiful. Whatever the cause, a market that cannot rally on good news often proves vulnerable to larger losses, which may bode ill for the late-winter outlook. February cattle dropped 0.37 cents Thursday and closed at 127.62 cents/pound. April slipped 0.12 cents to 132.80.
Direct hog markets surged rather substantially Thursday, thereby encouraging CME swine traders confounded by their inability to sustain advances through much of late January. Bulls may also have been reacting to talk of belated ham strength. That is, the leg muscle market had recently proven rather flat in the wake of its big holiday breakdown. However, grocers may finally have begun buying hams for planned features for Easter weekend sales, since hams were called 3 cents higher on the midday USDA pork report. A sustained seasonal advance could do a great deal to boost hog prices as well. Bears can reasonably point to concurrent beef weakness as potentially capping hog and pork gains, but having the February post its best-ever close suggests bullish momentum is building. February futures surged 0.50 cents to 87.60 cents/pound Thursday afternoon, while June edged just 0.07 cents higher to 98.10.
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