General Comments:
Live cattle were able to hold their head above water, closing higher for the third consecutive day. Higher cash for the week continues to provide some support in anticipation of higher prices next week. Most cash trading has been accomplished this week with light trading expected Friday as buyers finish up the week. The upside may be limited as there remains a large supply of heavier cattle that have been sitting in feedlots waiting for higher prices. However, most of the cattle coming to the market seem to be current with weights. Lean hogs broke chart support Thursday, sending futures significantly lower. The December contract remained slightly above the low reached a month ago. Large supplies of pork continue to hang over the market and are expected to remain that way for the near term. Demand uncertainly will keep traders cautious. The national average price of pork in China continues to slowly increase and is running nearly 11% higher so far this year. This should increase their pork imports, but volumes have not been sufficient to turn market sentiment.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Feeder cattle are leading the charge higher, providing spillover support to live cattle. The price uptrend remains intact despite some consolidation.
| 1) |
Heavier cattle are still waiting in the wings at some feedlots. Higher prices may bring these out to the market quickly satisfying buyer demand and leaving them less aggressive.
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| 2) |
Higher cash cattle and higher boxed beef should keep prices stronger to close out the month. Buyers may need to raise bids next week to obtain supply and keep current with demand.
| 2) |
Traders may lighten their positions at the end of the month, triggering some selling after the recent price increase.
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| 3) |
Large amounts of pork continue to be absorbed by the market with slaughter slightly less compared to last week. This could bring short-covering on the last day of the month as traders take profit on short positions.
| 3) |
Hog futures breaking chart support opens the way for further liquidation. Contracts may retest the lows from a month ago.
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| 4) |
Weekly export sales increased 24% from the previous week and was up 12% over the four-week average. China was the largest buyer. Futures could rebound as Thursday might have been a buyer the rumor, sell the fact reaction.
| 4) |
Large hog numbers seem to support USDA's projection of an increase of pork production this year to a record 995 million pounds. This will leave the market on the defensive and upside price potential limited.
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| #completeherdhealth |
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