GENERAL COMMENTS:
Traders seem little interested in putting much premium in futures in anticipation of higher cash. They are content to move futures higher to keep in line with cash. Caution may be exercised this week due to the Thanksgiving holiday and a disruption in the usual business. However, business will be done. It will be a matter of how aggressive packers will be looking ahead to December and holiday demand. Boxed beef was higher on Friday providing some stability with choice up $2.25 and select up $0.67. This should indicate to packers the need to keep an active slaughter pace. There was little to get excited about on the Cattle of Feed report. It came in mostly in line with expectations, leaving little reason for futures to gap open one way or the other. The on feed number came in at 100% compared to the average trade estimate of 99.7%. Placement were 102% compared to the average estimate of 102.4% with Marketings at 95% compared to the estimate of 96.1%.
Hogs diverged Friday with nearby contracts showing losses while later contracts closed higher. Spread trading was active as December moves nearer the end of the contract and cash needs to converge. There is time for significant movement in December, but the current strength in cash does not bode well for much upside. Traders have turned more bullish in differed contracts as they have been moving steadily higher. Slaughter pace will be lighter this week due to the holiday keeping packers less aggressive. Cash on the National Direct Afternoon report on Friday was down $0.15 while cutouts were up $0.13.
| BULL SIDE | BEAR SIDE | ||
| 1) | The trend is your friend and the trend in cattle futures is up supported by higher cash the past weeks and the prospect of still higher cash to come. | 1) | The Cattle on Feed report did not provide bullish numbers for traders to latch onto. This may be a bit of a disappointment to some who might liquidate positions before the holiday. |
| 2) | The Cattle on Feed report was rather neutral, which should keep support under the market. | 2) | February and April live cattle contracts have chart gaps remaining due below the market due to the strong opening last Thursday. These gaps will likely be filled. |
| 3) | Differed hog futures are trending higher in anticipation of increasing exports due to further spread of African swing fever and marketing eventually becoming current. | 3) | December hogs have little reason to push higher without the support of underlying cash. Futures will remain close to cash over the next three weeks. |
| 4) | The volatility in cutouts may suggest the market is forming a bottom as consumers may be turning more toward pork rather than high priced beef. | 4) | The holiday-shortened week may leave packers less aggressive and will purchase lower numbers. Market-ready hogs will remain plentiful. |
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