CME lean hog futures complex, cattle seen mixed

 

 

CME lean hog futures on Tuesday (April 6) are called mixed with possible strength in the nearby months coming from steady to stronger expectations in the cash hog markets.

 

The deferred months may see some weakness on hedge selling, profit-taking or selling of long positions purchased earlier and their mildly overbought conditions after the recent strong gains.

 

Follow-through buying interest from strong gains posted on Monday (April 5) could help lift April and the summer months in early trading, a broker said.

 

Some analysts and brokers said the futures market may be nearing a short-term top since several contracts are nearing an overbought status and predict that futures may soon pause to let cash prices catch up.

 

Belly futures are also expected to open mixed. Most-active May hit a new contract high Monday and closed near midrange but still at its highest level in the life of the contract. The nine-day relative strength index is near the overbought threshold though.

 

Meanwhile, CME pit traded live cattle and feeder cattle futures prices Tuesday were expected to open lower as the market pulls back from Monday's sharp gains.

 

Globex market prices were weakening after overnight gains as traders wondered if cash markets could keep up. One analyst said the futures market already has a US$1-per-hundredweight gain in cash prices factored in, and they were hesitant to take prices above a US$97 cash trade without some hint that cash actually could get that high.

 

The number of cattle being offered for sale in the Plains this week is up from last week, and many analysts and traders wonder if the extra numbers would not keep a lid on cash prices as they work above US$95 and close in on US$100.

 

With the spike coming on a Monday, traders in the pit may take Tuesday as a pause-and-reflect day, analysts said.

 

Feeder cattle futures also may pause and reflect, market analysts said. After a "giant" gain Monday, traders have to be wondering how much more the market can take, a broker added.

 

Feeder cattle prices pulled back a little in Globex trading overnight as if to show the way for the pit trade, the broker said.

 

Cash markets for feeder cattle also appeared to be getting ahead of futures and could pull back to get in line.