Improved South American rain forecasts undercut crop futures
Given the size of its breakdown since early January, the cattle market seemed overdue for a short-term rebound over the short run. However, late morning news of wholesale weakness undercut such bullish ideas. Indeed, the tide seemed to turn bearish when the topic of potential Russian restrictions on American beef and pork was raised once again. One domestic source suggested only a portion of U.S. beef sales would be affected at the February deadline for complying with Russian wishes, which may have limited the futures damage. On the other hand, early afternoon news that fed cattle had traded lightly at 122 cents/pound (down 3 cents from last week), appeared decidedly negative for the short-term outlook. The fact that CME futures actually closed higher on the day was quite impressive. February cattle ended the day having risen 0.20 cents to 125.77 cents/pound, while April rose 0.20 cents to 130.67.
Hopes for seasonal strength seemed to support CME lean hog futures Wednesday morning, with traders very likely hoping a big cattle rebound would pull hog and pork prices upward as well. However, the mid-morning report that Russia may step up its restrictions on American beef and pork in response to its purported concerns about the hormone ractopamine in our meat sank deferred futures soon thereafter. February held up well due to the fact that the proposed Russian restrictions wouldn’t take effect until early next month. Talk of resurgent cash prices probably supported prices later in the day. February hogs rose 0.27 cents to 85.70 cents/pound at their Wednesday settlement, whereas June futures dipped 0.20 cents to 96.90.