GENERAL COMMENTS:
Nearby cattle contracts barely closed higher while deferred contracts showed more strength. There is some anticipation cattle supplies may tighten as the year progresses. Over the past nearly two months, cattle weights have been somewhat steady during a time when weights generally increase. Feedlots are optimistic that they will be able to receive higher prices for their cattle this week. Boxed beef prices continue to soar with choice cuts up $2.54 and select cuts up $4.19. Orders for Labor Day are strong with the possibility that plants will not be able to satisfy all of those orders at currently slaughter rates. There were a few cattle traded in Nebraska Monday, averaging $197. This was not enough to sufficiently test the market, but it is likely setting the stage. The Commitment of Traders report showed funds were net buyers of 11,271 contracts, increasing their net-long positions to 65,898 contracts.
Hog futures jumped, taking back the losses of the previous two days. Futures were over $1.00 higher in all contracts through the next year. Even though cash on the National Direct Afternoon report declined $0.70, cutouts were sharply higher gaining $4.82. That should provide further support and should spur packers to step up and purchase hogs more aggressively. Traders may have more confidence buying into the market at these lower prices and the potential for greater demand over the next few weeks. The Commitment of Traders report showed funds as net buyers of 8,916 contracts, increasing their net-long positions to 85,980 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Labor Day orders are being placed amid strong demand. This is pushing boxed beef higher as plants may have a difficult time meeting the demand at current chain speeds. | 1) | Packers already have cattle purchased ahead, reducing the amount needed to be purchased to keep current chain speeds. They may pay a higher price, but the increase may be minimal. |
| 2) | Feedlots have a strong potential for receiving higher cash this week. Packers will need to step up to the plate to fill orders. | 2) | The increase of cattle futures Monday did little in the way of turning the trend higher. |
| 3) | The rebound of hog futures Monday bodes well for the market as the liquidation phase has been completed. | 3) | The concern of China backing away from the market is a bearish aspect of the market. This could back up supplies into the domestic market. |
| 4) | The sharp increase of cutouts is a strong indicator of good demand. This should spur packers on to bid higher to obtain the hogs they need to fill that demand. | 4) | Packers may not be too quick to increase their bids for hogs wanting to take advantage of higher cutouts in order to improve profits. |
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