GENERAL COMMENTS:
Live cattle futures were finally able to push to new contract highs. Only February and December 2023 contracts failed to move high enough to accomplish the task. Strength did not stem from boxed beef prices as they were lower with choice down $2.07 and select down $0.22. This ended the recent streak of higher boxed beef prices. Strong futures regaining a potential upward trend will give feedlots confidence to ask for more this week. However, packers are looking at reduced slaughter needs through the end of the year and may not be willing to pay more. Packers do not seem to have many cattle purchased ahead, but they may not need to through the rest of the year. The Consumer Price Index was less than expected which rekindled the idea inflation may begin to temper. The Fed's decision on the amount interest rates will be increased will be seen today.
Hog futures showed significant volatility yesterday with contracts unable to hold the highs of the day. Today is the final day for the December contract with February taking over as lead month tomorrow. Traders saw the strength of cutouts and felt confident to buy into the market. However, the ability to hold earlier strong gains gives the impression there was some reluctance over continued strength. The National Direct Afternoon report showed cash down $0.20 when cash is generally higher on Tuesday. Packers pull back on slaughter speed toward the end of the year.
| BULL SIDE | BEAR SIDE | ||
| 1) | New contract highs in cattle futures might increase the bullishness of the market if the previous highs become support levels. | 1) | Packers are purchasing for holiday-shortened weeks which may temper their desire to increase cash bids. |
| 2) | Feedlots may hold their ground again this week knowing that packers will need to purchase cattle even though less aggressively due to the upcoming holidays. | 2) | Cattle futures will need to close above previous contract highs or selling may increase as traders liquidate positions. |
| 3) | Hog futures may have found support yesterday with higher cutouts. Holiday demand could turn the trend higher. | 3) | Packers may want to increase margins by reducing chain speed in hopes that holiday demand will be strong, and cutouts increase. |
| 4) | Hogs are moderately oversold technically which could trigger further short covering and higher prices. | 4) | Recent pork export sales have not been supportive to the market. Slower international demand may back up supply. |
No comments:
Post a Comment