GENERAL COMMENTS:
After digesting the Cattle on Feed report over the weekend, traders set their sights on the strong potential for higher cash this week. Demand is solid and packers need to maintain brisk slaughter schedules. Packers did not throw out any bids yet this week, and probably will not either. The holiday-shortened week may have them stepping up to match the offers in order to accomplish business. Some offers so far have been $1.00 to $2.00 higher. Boxed beef prices were mixed Monday with choice up $0.84 and select down $0.10. The October Cold Storage report showed total beef in storage at 477.1 million pounds. This was up 9% from September, but down 5% from October 2021. This should be supportive to the market. The Commitment of Traders report showed funds are net buyers of 3,937 futures contracts bringing their net-long positions to 52,010.
Nearby hog futures were able to close higher but continue to have difficult headwinds due to lower cash and cutout weakness. Later contracts continue to move higher with June and July setting new contract highs Monday. The momentum continues to build as traders feel supplies will become tighter. The October Cold Storage report was friendly with pork bellies down 10% from September at 11.6 million pounds. This is 39% below a year ago. Total pork in inventory was 439.6 million pounds, down 4% from September and down 2% from a year ago. The National Direct Afternoon report showed cash down $0.04 while cutouts fell $3.57 due to significant losses in hams and bellies. The Commitment of Traders report showed funds as net buyers of 6.456 futures contracts bringing their net-long positions to 46,872.
| BULL SIDE | BEAR SIDE | ||
| 1) | Traders bought into cattle futures in anticipation of higher cash. Strong demand continues and packers need to satisfy that demand. |
1) | It is a holiday-shortened week, which may leave packers less aggressive in the cash market. |
| 2) | The trend is up as current demand remains strong now and likely for the foreseeable future. | 2) | Beef supplies in freezers grew 9% from September to October. This indicates supply is exceeding demand. |
| 3) | Deferred hog contracts continue to push higher in anticipation of reduced supplies moving through next year. | 3) | All hog futures contracts, except December, have closed the chart gaps. This may result in some technical weakness in nearby months. |
| 4) | Fund traders are buying hog futures for the long-term, providing the technical support needed to continue the trend higher. | 4) | Both cash and cutouts continue to falter even though demand is good. Market-ready hogs are plentiful, leaving packers able to purchase hogs without difficulty. |
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