GENERAL COMMENTS:
Traders were a bit disappointed cash cattle did not trade Wednesday. Feedlots set their sights on higher cash posting offers and waiting for packers to step up to the plate. However, boxed beef prices have been falling with choice down $3.92 and select down $2.59 Wednesday. This may make packers less willing to pay up as much as they have the past few weeks. However, they do need cattle and do not have a large amount forward contracted for later deliveries. Cash should trade Thursday as packers will want to obtain cattle. Expectations for an increase of cash has been trimmed to $1.00 higher rather than the earlier $2.00 to $3.00 higher. Weekly exports sales will need to be as good as last week or better.
Hog futures are having difficulty finding solid footing. Chart gaps have been closed on the downside, but that has not triggered any aggressive technical buying. Cash weakness continued to be the overriding fundamental factor with the National Direct Afternoon Hog report down $4.16. If anything, lower cash should improve demand and if cutout prices Wednesday are any indication of that, the market may be on its way to recovery. Cutouts jumped $9.35 with hams leading the way with a gain of $29.58 followed by bellies posting a gain of $9.06. Packers may bid a little higher Thursday in order to make sure they maintain sufficient ownership moving closer the holidays. Weekly export sales need to be strong with hopefully China being one of the top buyers again. Saturday slaughter is projected to be 252,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Live cattle futures are at a discount to cash and should move higher if cash cattle trade higher this week. | 1) | Cattle futures have been consolidating as traders are uncertain whether packers will continue to increase bids due to boxed beef weakness. |
| 2) | Cattle futures have been consolidating but continue to remain in an uptrend. | 2) | Cattle futures are on the verge of moving sideways through the uptrend line, which could trigger some technical selling as a near-term top could be in place. |
| 3) | Hog futures are oversold and ready for a bounce. The liquidation phase has been stretched a little too far. |
3) | Cash hogs continue to remain weak as packers have no need to be aggressive in the cash market. There is no shortage of supply. |
| 4) | The huge increase of cutouts may indicate demand is improving at lower pork prices. This may require packers to be more aggressive, finding hogs in the country in order to maintain or improve slaughter pace. | 4) | Cutouts have been so volatile over the past few weeks, making traders cautious over the large increase Wednesday. Much of that could be eliminated Thursday. |
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