The market tried both ways, but couldn't find follow through. The bulls were touting the weather and higher beef early, but that was discounted as the weather storms are relatively weak and the Choice beef was a $1+ lower this morning. The bears were touting larger supplies and higher corn, but that was discounted as the impacts of the bad storms would "snowball" with the minor ones to limit near-term supplies and higher corn should encourage marketing cattle at lower weights to reduce production and support prices. The mixed opinions help explain why futures settled near mid range. February futures is showing a premium to cash cattle prices that traded at $87-88 last week with expectations from $1 lower to $1 higher for this week. For now, the futures premium would seem large enough to limit upside moves until further evidence of a trend for higher cash cattle prices.

Feeder cattle futures were mixed on the close, finishing strong once again for most contracts. The session highs came early associated with corn at its session lows, while the session lows for feeder cattle were associated with corn at its session highs. Likewise, the late rally in feeder cattle saw corn futures slipping back. Gains were justified by the futures discount to the feeder index. The late slide by January feeders reflects lower cash feeder prices. Feeder demand is expected to remain soft with sloppy yards and corn prices trending higher. March feeders closed near the previous two closes, and have developed a consolidation trading range of roughly 91.00 to 94.00.

Milk futures were higher. Early action was mixed. Cheese prices were steady and butter prices were slightly higher. The higher corn prices prompted additional buying on ideas that producers would cut production. The gains failed to confirm yesterday's reversal tops, triggering buy stops of shorts as futures pushed to new highs or match previous highs for the move. My bias is that the higher milk futures will encourage producers to keep their dairy cows, which will lead to higher production that expected and should prompt lower prices than futures are offering.

Source: Inside Futures