There were no cash cattle traded Tuesday as packers and feedlots have so far been unwilling to budge. The inability of cattle futures to reach to higher ground may make it difficult for feedlots to make a case for higher cash business to be done. Although futures are still in an uptrend, there is concern a temporary top may be made as the market corrects from being overbought. Cutout values will need to find support in order to add support to cattle futures. Beef supply is expected to decline from the fourth quarter of this year into the first quarter of next year with December and February futures showing that.
October and later lean hog futures have posted a strong showing the past three days, but the same cannot be said for the August contract. Spread traders have been active by selling August and buying October and later contracts. There has been too much premium in the August contract relative to underlying cash, which triggered the bearish trading activity. Hog supplies through the end of the year are expected to slow from the brisk pace that it has been so far this year.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Higher cattle traded last week and the willingness of buyers to post bids at last week’s prices is a testament of good demand and the willingness to accomplish business.
| 1) |
Cattle futures are correcting from an overbought status and may be poised for further declines if technical support levels are taken out.
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| 2) |
Cattle futures have been unable to push to new highs since the lows have been established in late June. However, we have seen this pattern a few times as the market collects itself and then continues higher and this may be no exception.
| 2) |
Bids from packers may not be raised due to the inability of cattle futures to trend higher so far this week.
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| 3) |
The strength of hog futures seems to be gaining momentum in later contracts as optimism grows over pork demand from China due to the significant increase of hog prices in the country.
| 3) |
Hog futures have exhibited three days of strong prices, which is generally the limit of short-covering or spread trading with lower prices potentially following.
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| 4) |
The surge of aggressive trader buying interest and the penetration of overhead resistance may open the way for further upside price potential.
| 4) |
Anticipated increased demand from China so far has been less than expected and disappointing. The market may want to see confirmation of increasing international demand before becoming overly optimistic.
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| #completeherdhealth |
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