GENERAL COMMENTS:
Cattle futures pushed higher on the idea that cash may increase further than the gain already seen on limited trading activity. Packers were bidding higher than last week at $1.28 in the South and $2.03 in the North, which were steady prices from Tuesday and already higher than last week. However, feedlots are holding for higher prices, and they feel they can get them. Packers need cattle to maintain the slaughter pace to fill demand, and more may be required of them in order to obtain those cattle. The price premium December held over cash has been quickly eliminated over the past week. Boxed beef price increased Wednesday with choice up $1.11 with select up $1.59. Weekly export sales may trim some of the exuberance if the numbers are not very good.
Hog futures turned higher, regaining much of what was lost on Tuesday. Cash did not support the move, but cutouts came to life. Price on the National Direct afternoon report declined $0.30 with a weighted average of $60.68. Strong support stemmed from cutouts, jumping $6.23 led by a huge gain in hams of $23.61. The recent volatility of cutouts may indicate the market is finding a bottom. With strong cutouts indicating good demand, packers may need to pay higher prices for hogs in order to keep that demand satisfied. Weekly export sales will set further price direction Thursday.
| BULL SIDE | BEAR SIDE | ||
| 1) | Follow-through buying Wednesday on the prospect of higher cash should support as traders have turned more friendly to the market. | 1) | Live cattle futures gapped higher Wednesday, leaving the market vulnerable for a retracement to fill the gap. |
| 2) | Packers are paying higher money for cattle while feedlots are holding for still higher money. There is strong potential for cash to trade higher than earlier this week. | 2) | If feedlots decide to sell at the earlier levels of cash trading this week, futures may set back as traders remove the extra premium in the market. |
| 3) | The recent volatility of cutouts and the strength seen Wednesday may indicate the product market may be bottoming. | 3) | Hogs will need to find support from cash or futures will continue to chop around at lower prices. |
| 4) | 4) | Weekly export sales need to be good Thursday or futures could try and retest the lows of last week. |
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