GENERAL COMMENTS:
There was hope packers needed to be more aggressive this week with higher bids surfacing as they want to take advantage of escalating boxed beef prices. That was not the case as nothing happened except for the distribution of showlists. Those showlists were mixed with numbers higher in Kansas and Nebraska/Colorado with Texas showing smaller numbers. It is doubtful cash trade will wait until late in the week, but the resolve of both feedlots and packers will be tested this week. August and September live cattle futures were higher but continue to remain in the sideways range. Boxed beef prices increased substantially again with choice cuts up $4.97 and select cuts up $5.53. Dressed cattle weights increased a pound to an average of 818 pounds last week compared to 817 pounds the previous week. This compares to 836 pounds a year ago. The Commitment of Traders report showed funds as net buyers of 906 contracts bringing their net-long positions to 68,812.
Hog futures had a mind of its own seemingly to completely disregard what was taking place in cash and cutouts. Triple-digit gains were seen in some contracts with October leading the charge as trader believe the huge discount needs to be reduced. Support was purely technical as traders seem intent to close the chart gap now only $0.97 higher than the close. The National Direct Afternoon Hog report showed a decline of $2.29 Monday. Along with this, cutouts fell $6.33 painting a somewhat dismal picture for pork at the present time. The Commitment of Traders report showed funds were net sellers of 12,277 contracts reducing their net-long positions to 76,854 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Live cattle futures may be building strong support as they continue to remain in a sideways pattern. | 1) | Live cattle have been trading in a sideways range for a period of time, which may be building upside price resistance. |
| 2) | Light showlists might trigger packers to become a bit more aggressive and raise bids as they should need to increase contracted supplies. Demand for beef may decline a bit after Labor Day, but it is likely it will not fall rapidly. | 2) | Packers seem determined to wait it out until boxed beef prices begin to weaken. |
| 3) | Hog futures showed strength despite the weakness of cash and cutouts. Traders are looking ahead to tighter supply and increased demand. | 3) | Hogs may be moving higher technically, but not fundamentally. Once the chart gap in October is filled, selling pressure may return. |
| 4) | October may move higher in order to close the chart gap that remains from Aug. 5. | 4) | A bottom in pork cutouts was thought to have occurred, but that does not seem to be the case as weakness continues. |
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