Light trade took place Wednesday mainly in Texas and at $2 higher than last week. Buyers seem more willing to open the checkbook in the attempt to procure needed cattle supply. Futures were higher in reaction to higher bids with October futures finally able to close above $100 where it has not been since Aug. 26. Asking prices are set at $103 in the South and $167 to $170 in the North. More business is expected to be done Thursday. Higher futures prices should provide some confidence for sellers to expect higher cash. December live cattle futures closed at the highest level since Aug. 12. It will still take a substantial effort to regain the losses of early August, but the market seems to be slowly gaining ground. Cutouts took a hit Wednesday, which is a bearish anchor on the market.
Lean hogs closed in positive territory Wednesday, which may indicate follow-through buying Thursday. The October/December spread continued to unwind somewhat Thursday. Futures contracts seem to be consolidating. Cutout prices continue to struggle as well as heavy supplies are keeping a lid on the market. China is planning to auction 10,000 metric tons of frozen pork they have in reserves in order to control pork prices. Supplies are being reduced, which may bring them to the U.S. market in the future.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Higher cash cattle price than last week should provide support for futures, which may finally turn the trend higher.
| 1) |
Significantly lower beef cutouts does not bode well for cattle prices. Packers may be reluctant to pay much higher for cattle than necessary.
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| 2) |
Attention will be turned to the upcoming Cattle on Feed report on Friday, which should keep futures from falling back and possibly result in some short covering prior to the report.
| 2) |
October and December cattle futures have yet to push above price resistance keeping traders more willing to remain short the market by selling price rallies.
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| 3) |
China's national average pork price continues to increase with year-to-date prices up 109.3%. This should bring them into the market to purchase pork sooner rather than later.
| 3) |
Hog supply remains large with heavy weekly slaughter numbers keeping packers satisfied without having to bid higher to obtain supply.
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| 4) |
The unwinding of the October/December futures spread should continue with greater buying interest in October now that there are no more unfilled price gaps below the market, giving traders more confidence to step in.
| 4) | Struggling cutouts and no indication of increasing export business to China or even the rumor of any in the foreseeable future, leaves the market in limbo with no additional catalyst to push prices higher. |
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| #completeherdhealth |
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