Look for the cattle complex to open on a mixed basis thanks to a combination of residual selling and short-covering. Lean hog issues should begin some higher, supported by cash premiums and improving carcass value.
Cattle: Steady Futures: Mixed Live Equiv $132.78 + .37*
Hogs: Steady-$1 HR Futures: 25-50 HR Lean Equiv $ 88.74 + .57**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Both buyer and sellers are in a state of shock Tuesday following Monday’s sudden implosion in cattle futures. In a flash, the board seemed to mock tall cash premiums by digging even deeper discounts. Whether such a reaction represents an excess remains to been seen, but some apparently saw December’s larger than expected placement as just the first step in feedlot population mounting over the next several quarters.
Our guess is that bids and asking prices will remain poorly defined until Thursday or later. The annual cattle herd inventory will be released Tuesday afternoon at 2 p.m. CST. Our guess is that total numbers as of Jan. 1 will be close to 94 million head, 2% to 3% greater than last year. Similarly, the 2016 calf crop should be confirmed to be 2% to 3% greater than 2015.
Expect live and feeder futures to open on a mixed basis linked to residual selling on one hand and short-covering on the other.