GENERAL COMMENTS:
Live cattle futures benefited from higher cash again Wednesday. Dressed cattle in the North traded $4.00 higher than last week while Southern cattle traded $1.00 to $2.00 higher. This certainly gives feedlots confidence to use the market to their advantage and hold for higher prices. Maybe the premium to December and February contracts are attainable if packers continue to need cattle to keep demand satisfied. It is surprising packers were as aggressive as they were early in the week and despite the weakness of boxed beef. Choice cuts were down $1.13 with select cuts down $0.85. Weekly exports will either support the trend higher or limit price potential.
Hog futures were hit again Wednesday with December, February and April testing the lows from mid-September. February closed below support, possibly causing traders to rethink getting long the market at these levels. Hopefully weekly export sales will provide some positive numbers or further losses are possible. Cash did not find support, declining $0.62 on the National Direct Afternoon report. Cutouts could not find support with the average price down $0.85. Packers still see no need to step up to the plate and bid higher as hogs continue to be available and ready to come to the market. Estimated slaughter for Saturday is 155,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cash cattle has had a nice increase this week as packers needed to bid higher to obtain the desired numbers and keep the brisk slaughter pace. | 1) | The outlook is for a plentiful supply of cattle, which may keep a lid on price potential through the end of the year. |
| 2) | Boxed beef volatility gives the impression the market is finding a bottom with demand likely to improve through the end of the year. | 2) | Feeder cattle weakness may be an anchor on the live cattle market along with a more bullish outlook for corn prices. |
| 3) | Hog futures are at or near the lows from mid-August and oversold. A combination that could trigger short-covering. | 3) | Hogs tested strong support with December closing below that level. This could open the door for sell stops being hit, pushing the market still lower. |
| 4) | 4) | Cash and cutouts just cannot seem to find a bottom, keeping bullish traders on the sideline. |
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