GENERAL COMMENTS:
Commodities fell in general Tuesday as traders came back from an extended weekend seeing overall bearish news. The increase of COVID cases might hinder beef demand to some extent as some slowing of restaurant activity may surface. However, this may be offset by retail demand. The uncertainty is what is driving the market. Steadily declining boxed beef prices are not providing any support either. Tuesday, choice cuts were down $1.23 and select cuts were down $2.23. The cash market was void of business as expected. Showlists were mixed, higher in Texas and Kansas, but lower in Nebraska. The continued losses of cattle futures does not bode well for the potential for higher cash. The decline of futures in light of the sharp losses in grain provides a more bearish scenario than usual. The Commitment of Traders reports showed funds as net sellers of 9,003 futures contracts, reducing their net-long positions to 83,646 contracts.
Hog futures opened higher Tuesday, but then fell into triple-digit losses in the October and December contracts. Losses were the result of pressure on commodities in general. Continued weakness of cash and cutouts leaves strong support elusive. Price on the National Direct Afternoon report declined $1.29 while cutouts were down $2.48. Hog supplies remain readily available to the market, leaving packers unaggressive. The losses in futures Tuesday may be difficult to overcome in the near term. The Commitments of Traders report showed funds as net buyers of 4,182 futures contracts, bringing their net-long positions to 83,389 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Falling boxed beef prices should stimulate demand at the retail level which might compensate for some slowing of demand from restaurants. | 1) | Cattle futures still have not found a bottom after nine days of lower lows. The fear of falling demand has a grip on the market. |
| 2) | Packers need to purchase supplies as their purchasing the past few weeks has been limited. This may prompt them to pay no less than steady money even though futures may suggest otherwise. | 2) | Falling grain prices have not been able to stem the selling tide. The bullish Cattle on Feed report provided no support. The current bearishness may be difficult to overcome. |
| 3) | The pressure on hogs may have been more the result of selling across the board Tuesday in most commodities as well as the financial markets and not due to current fundamentals. | 3) | The discount of hog futures to cash may be warranted if weakness remains for both cash and cutouts. |
| 4) | Both domestic and international demand for pork remains strong with tightening supply still expected. | 4) | Tuesday may have opened the door for further fund liquidation due to technical support being penetrated. . |
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