GENERAL COMMENTS:
Traders did not expect cash cattle to trade Monday. That set the stage for intraday technical trading as there was nothing to generate excitement. Hopes for continued higher cash through the end of the year had been dashed with cash price weakness last week. Now, there is concern cash may trade a little lower this week as packers seems to have set themselves up well through the end of the year with quite a few deferred cattle already on the books. They will still purchase cattle but likely at no better than steady money. It will be up to feedlots as to how aggressive they want to move cattle by the end of the year. Boxed beef provided no solid direction with choice down $1.32 an select up $1.40. The Commitment of Traders report showed funds were net buyers of 1,333 futures contracts, bringing their total net-long positions to 79,850 contracts.
Hog futures held well, posting only minor loses with December showing the greatest loss of $0.77. December will cease trading Tuesday with February taking over as lead month and carrying a significant premium. Traders are holding more optimism for next year and may be willing to buy any price breaks. What is lacking is tighter supplies and higher cash. The National Direct Afternoon report did show cash up $0.86, but nothing to get too excited over as packers are not expected to be very aggressive through the end of the year. Cutouts were up $0.84 providing some support to the market. Both cash and cutouts are expected to remain choppy this week. The Commitment of Traders report showed funds as net sellers of 9,169 futures contracts decreasing their total net-long positions to 47,204 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle futures were able to shake off lower prices despite the anticipation of lower cash this week. | 1) | The expectation for steady-to-lower cash may not provide much optimism for traders to support the market. |
| 2) | Packers may have a good amount of cattle contracted through the end of the month, but they will still need to buy and next year may be another story with tighter supply. | 2) | Boxed beef prices seem to be struggling, indicating demand may be slowing for the time being. |
| 3) | February hogs closed the chart gap but did not fall back very much into the close. Traders seem to be willing to buy the breaks. | 3) | Hogs have rebounded again with limited support from underlying cash. This may limit upside price potential. |
| 4) | Hog futures held most of Friday's gains with support coming from cash and cutouts. Traders may become more confident buying into the market. | 4) | December hogs go off the board Wednesday with February taking over as front month carrying a substantial premium that may be difficult to maintain.. |
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