General Comments:
Bids were raised in the country Wednesday as packers were intent on doing business earlier rather than later. Early sellers likely wish they would have waited, but cattle needed to be moved and lower prices were taken. Even though packers bid up Wednesday. Cash is still lower than last week. The higher prices may bring a large volume of fat cattle to the market that have been waiting in the wings. This could fill packer demand quickly. Boxed beef continue so struggle with large losses being tallied. However, the market is still correcting from the large increase of boxed beef price in April and early May. Futures showed little in the way of positive movement with contracts still entrenched in a sideways to lower trend.
Hog futures made a nice comeback from the lows posted early Wednesday. However, this did not turn the trend of the market as new contract lows were established in July and August before buying became more aggressive and prices rebounded. Higher cutouts does provide a glimmer of hope for the market as retail demand is higher, but that holds little consolation given current fundamentals. Cash could be no better than steady as packers still see heavy supplies ready to come to the market.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Packers raising bids Wednesday indicate their desire to purchase cattle sooner rather than later. Retail demand is stronger than expected leaving packer somewhat short of supply.
| 1) |
Cattle futures remain entrenched in a sideways pattern of which there may be no breakout for the foreseeable future. Futures are not oversold, leaving technical traders unconcerned about short-covering.
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| 2) |
Futures closing higher for the third consecutive day may trigger further short-covering through the end of the week.
| 2) |
Even though packers raised bids Wednesday, cash prices remain lower than last week. Continued weakness of boxed beef leaves little reason for traders to load up on long futures positions.
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| 3) |
Cutouts did an about face Wednesday as consumers are purchasing greater amounts of pork. This should support cash and thereby support futures.
| 3) |
New lows in hog futures Wednesday does not bode well for the market. There is little incentive for traders to buy into the market.
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| 4) |
Hog futures making new lows and then closing above technical support could result in further short-covering as the market is very oversold and a price bounce is likely.
| 4) |
Supply remains large, which will keep packers less aggressive knowing it will come to the market. Until the backlog is moved through the system, prices will remain under pressure.
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