CHICAGO (Dow Jones)–Conflicting market fundamentals and potential
profit-taking are seen undercutting Chicago Mercantile Exchange hogs at the
start Thursday.
Wholesale pork price’s $1.42 per hundredweight relapse Wednesday suggests to
some that retailers are buying hand-to-mouth ahead of the Fourth of July
holiday. However packers are expected to pay steady-to-higher money for
supplies to satisfy this week’s slaughter needs.
And while speculative buyers believe July’s bearish price premium compared
with CME’s hog index is somewhat manageable, they are less comfortable with the
even wider gap between the index and the August contract.
Chartwise, July looks to break out of its 79.34-cents 10-day moving average
support and 81.59 100-day moving average resistance boundaries.
August is tucked between 82.37 20-day moving average support and 83.51
40-day moving average resistance levels.
The open in CME’s pork belly pit is expected mixed on spillover from
futures’ drop Wednesday against potential short-covering.
Cattle Complex
Live cattle at the exchange is expected to start down slightly on
profit-taking and buyer caution as the cash sector continues to negotiate this
week’s cattle trade.
So far this week, a few cash-basis cattle sold for $91 per hundredweight.
Other packer bids were quoted at $90 to $91 against $93 to $95 asking prices.
Fed cattle last week moved at mostly $92.50 to $93.
Slim profit margins and sputtering wholesale beef movement could keep
processors for spending more for supplies this week than a week ago.
The U.S. Department of Agriculture’s Wednesday evening boxed beef data,
which reflects beef prices at the wholesale level, showed choice cuts dropped
$0.44 per hundredweight, and select items slid $0.31.
Operating margin index for beef packers for Wednesday was plus $1.06 per
head, compared with plus $2.07 Tuesday, as calculated by HedgersEdge.com.
Nonetheless, those with bullish market leanings point to futures’ supportive
price discounts relative to cash that might generate down-side buying interest
which could help feeders fend off cash pressure.
Meanwhile, market participants will position themselves for USDA’s monthly
cattle-on-feed report on Friday at 3 p.m. EDT. The following are analysts’
averages and range of estimates for the upcoming data: