This weighed on futures amid considerable commercial selling. A snowstorm is still slated for later this week, but the storm was less intense vs recent forecasts which helped switch the focus to larger show lists and weak packer demand. Today's slaughter is back up to recent levels, but this week's slaughter looks like it could be down more than 10% from last year while the on feed supply looks huge with the on feed more than 120 days up 35% from last year. Cattle owners are asking $92-93 for their cattle as they see no hurry in marketing cattle. The futures premium suggests prices are going up and the recent winter storms reportedly took weight off cattle to allow them to stay in the feedlot longer. Plus, cattle owners need higher prices to help them deal with the larger costs due to the weight loss and inefficient feed conversions caused by the wintry weather. This stalemate and the holidays is why cattle sales have been light the past few weeks, and doesn't look much different for this week.

Feeder cattle futures were lower on Tuesday, finishing lower by about the same amount as they were showing gains earlier in the day. The gains were attributed the lower corn futures, which saw even larger losses after feeder cattle closed. This may offer some support tomorrow, but the lower fat cattle futures and weak feeder demand (sloppy pens) seem likely to limit any upside. The March posted an outside-down day which seems like a negative performance that could attract follow-through selling, however the action was all within recent highs and lows to continue the recent sideways trend. The Bollinger Bands are getting relatively narrow with support at around 95.00 and resistance at around 100.00, suggesting that a breakout move may be in the works fairly soon. One such motivator of that would be Friday's Supply and Demand estimates for corn.

Milk futures were lower. Yesterday's gains seemed to be too much, despite steady to higher cheese prices. Resistance at the previous gap attracted sell pressure. The seasonal for lower cheese prices and continued increases in milk production would seem likely to keep futures on the defensive at these historically high prices that look inflated relative to what cheese prices would normally suggest.

Source: Inside Futures