Cattle futures traded lower today after it gapped lower on the open and hitting a low of 134. 45 but had a nice bounce off the lows to close at 135.425. The USDA cattle on feed report that was released on Friday after the market close and showed a 1.7% increase for cattle on feed, while placements were only down .4% as opposed to the expected 8% drop (CME Daily Livestock report). Marketing’s were pretty much in line with expectations coming in at 2% lower. With this bearish report I believe we could see long liquidation coming in the short-term for this market. One thing I would recommend to keep an eye out for, is a quick back and fill that may occur before continuing the liquidation in the short term. I’ve been hearing over the weekend that some cash trades in Colorado have traded at 141 and in the Iowa/Minnesota region there were some 145 bids traded. Cash may help support the market in the long term but I believe we can expect futures to test the near-term lows at the 132 area for the June contract.
June lean hog futures hit limit down and stayed there for the remainder of the trading session today after the USDA cold storage report was released on Friday after the market close. The report can be viewed as a very bearish sentiment with there being an increase of frozen pork storage by 8% from last year and a 2% increase from the previous month. The bigger move was the pork bellies stocks coming in at 13% above from last month and 60% from last year. The move today in the hog market helped fortify what I see as a head and shoulders pattern for the June chart, this indicates to me that we will see further selling in the hog market with a target area down near the march low of 109.15.