GENERAL COMMENTS:
Friday is the last trading day for October live cattle with price falling back to get in line with cash. There had been hope that cash cattle would trade higher Thursday capitalizing on already higher cash business already done this week, but the disappointment of limited cash trade at prices already set for the week, triggered weakness. Higher weekly export sales than the previous week was not sufficient to stem the weakness that permeated through the cattle complex. The outlook remains for tightening cattle supplies through the end of the year with demand expected to remain strong, but that took a back seat Thursday. Boxed beef was higher with choice up $1.26 and select up $0.95, giving the impression a bottom may be in place.
Hogs took off higher Thursday with December leading the way. The bounce was generally technical in nature with some support from weekly export sales that were up 41% from the previous week. China being absent as one of the top buyers was offset by continued strong sales to Mexico. The large gain Thursday was not supported by cash with the National Direct Afternoon report down $0.67. Cutouts were better with an increase of $0.53. Futures should see some follow through Friday with technical traders possibly setting their sights on closing the chart gap on the upside. Saturday slaughter is estimated at 155,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Processing speeds are brisk, and cattle seem to be current, which might result in higher cash again next week. | 1) | The large decline regardless of higher cash cattle this week does not bode well for the premium December futures have to the current expiring October contract. |
| 2) | Even with the decline Thursday, the recent trend for live cattle is up. Futures may rebound with the expiration of the October contract. | 2) | There is expectation for higher cash due in the weeks ahead. If that does not materialize due to lighter demand than anticipated, prices may have a difficult time moving much higher. |
| 3) | Hogs were able to bounce from support and may now be moving to close the nearby chart gap left on Oct. 21. | 3) | The strength of hog futures Thursday was not fully supported fundamentally leaving it to mostly a technical event. |
| 4) | Increasing demand for pork from Mexico is offsetting the nearly nonexistent demand from China. This may keep exports on pace with expectations. | 4) | Packers continue to see plentiful supplies, making it unnecessary to bid higher at the present time. This may limit upside price potential. |
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