GENERAL COMMENTS:
Cattle futures struggled a bit in early trading Wednesday, but finally found greater buying interest from traders as cash cattle trading began taking place. Most trading activity showed steady prices Wednesday, but some trading took place $1 higher than last week's average prices in Kansas. This is certainly nothing to write home about, but it indicates cash will be no worse than last week. The problem of the weakness of boxed beef continues to remain. Choice cuts were down $1.09 with select cuts down $4.87 Wednesday. This dims the outlook for higher cash anytime soon. Cattle futures still remain in an oversold position, but not to the extent they had been. Weekly export sales will be released Thursday, which should provide some market direction.
Hogs continued to decline as the market corrects an overbought position as well as continued pressure from lower cash. However, there was a huge surge in cutout values Thursday led by the $16.63 price increase of hams. Cash on the National Direct Afternoon report declined $1.25 with a weighted average of $70.01. Packers continue to have access to a readily available supply of hogs for the time being. There remains the potential for tightening hog supplies as time progresses, but right now some of that has already been factored in even though futures have retraced over $3.00 from their high last week. Weekly export sales will be released Thursday morning with the potential for strong sales similar with last week.
| BULL SIDE | BEAR SIDE | ||
| 1) | Live cattle futures rebounded from long-term support and from the lows Wednesday possibly indicating the worst is behind us. | 1) | Cattle futures are trying to rally, but the volatility of this week still shows futures sideways and still in a downtrend. |
| 2) | Cash cattle have traded steady to $1 higher so far this week setting the stage for the week. Traders may feel more confident buying into futures. | 2) | Boxed beef continues to struggle, indicating ongoing weakness in demand. |
| 3) | Hog futures are correcting an overbought technical position. This should allow for further upside potential. | 3) | Hog futures have a large price gap remaining below the market, which may limit buying interest from technical traders. |
| 4) | The surge of pork cutouts Wednesday should provide some support to futures. It could also increase packer interest in purchasing to meet demand, which might begin to support cash. | 4) | Cash still have not found support. Packers continue to obtain the required number of hogs to fill demand without difficulty. |
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