Live cattle futures made new highs for the move with December moving back to the highest level since April. An overbought market, again, meant nothing in light of strong boxed beef prices. There was virtually no cash business done Monday with bids and offers few and far between. Packers may tip their hand a little more Tuesday as they might be anxious to get business done. Demand remains strong and orders need to be filled. Futures show no sign of topping, but a price retracement could take place any time as traders may take some profits to the bank.
Lean hog futures continue to struggle with lower prices dominating the trade on Monday in all but the December contract, which showed a slight gain of 7 cents. Packers see no need to bid higher as hog numbers remain large along with increasing weights. The market has been beaten down for over two weeks and could be prime for a bump in prices again despite the overall bearish attitude.
| BULL SIDE | BEAR SIDE | ||
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Price momentum in cattle may carry futures to significantly higher levels as long as beef prices remain strong.
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Each day cattle futures increase means we are closer to a top. Price cannot and will not increase forever without a significant price retracement.
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| 2) |
Strong futures and boxed beef prices should cause packers to raise bids this week in an attempt to purchase supply to meet current demand. Feedlots will resolve to hold for higher prices.
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Packers might say, enough is enough, and may hold bids steady this week. Strong boxed beef prices may have run its course for the time being as the market needs to balance supply with demand and not price itself out of the market.
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Lower hog prices should stimulate demand, which should provide support to futures. Pork demand should improve as we head through the end of the year.
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The inability of hog futures to find support and trend higher indicates ongoing weakness with packers bidding lower due to large numbers and increasing weights.
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| 4) |
The December contract closing in positive territory may trigger short-covering in it and later contracts as traders may view this as a market ready to bounce.
| 4) |
The lack of confidence in a U.S.-China trade agreement yet this year and the lack of China purchasing pork leaves the market questioning the impact of African swine fever on the international market.
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