Persistent drought fears boosted grain markets again Wednesday
Virtually all signs point to persistently tightening fed cattle supplies through March, but CME live cattle futures have clearly performed rather poorly lately. The main obstacle to a major rebound in CME futures has arisen from surprisingly weak wholesale prices and the underlying implication of weak demand. Indeed, in the absence of a major rise in beef prices, the cattle market seems likely to struggle. On the other hand, cash values reportedly posted a three-cent weekly jump to 125 cents/pound around noon Wednesday. Some bulls may have been shocked by the lack of bullish reaction in the Chicago pit, but we would remind readers that the nearby February future ended the day almost three cents premium to those spot values. Still, the potential for seasonal cash strength seems likely to support futures during the days and weeks just ahead. February cattle closed 0.27 cents lower, at 128.00 cents/pound, while April ended the day 0.05 cents lower at 132.92.
Hog futures have apparently suffered from disappointing developments in the cash hog and wholesale pork markets lately. Recent slippage in the CME lean hog index has exemplified that phenomenon, especially since bulls have been hoping for a sustained seasonal advance into mid-February. That may yet happen; in fact, swine values reportedly rose sharply in the Western Corn Belt Wednesday morning. When combined with the surge posted by pork loin values Tuesday afternoon (and its bullish impact upon carcass prices), that probably explains the moderate strength exhibited by CME lean hog futures late Wednesday morning. On the other hand, the lack of bullish leadership from the cattle market, particularly on a day when cash prices jumped three cents, probably caused the late hog slide. February hogs were unchanged at 87.10 at their Wednesday settlement, while June futures closed 0.10 cents lower, at 98.07.
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