GENERAL COMMENTS:
Cash has not yet traded this week which is not surprising. Feedlots have put out offers only in the South with Northern offers anticipated to be higher. Packers have not yet tipped their hand with bids. With weakening boxed beef prices, packers will not want to purchase at higher prices than last week. Boxed beef showed choice down $1.36 and select down $0.59. Cattle futures have been regaining some of the recent losses supported by lower cattle numbers and the projection for tightening supply. Of course, the potential for cattle prices will be up to demand. The December Cold Storage report showed total beef in storage at 544.0 billion pounds and 7% above a year ago. Inventory increased 4% from November as slaughter remained strong. Weekly exports sales will provide early market direction. Today is the final day to trade January feeder cattle futures and options.
Hogs made a valiant effort to hold support yesterday. If support can hold and cutouts begin to show consistent strength, futures may make a retracement. The National Direct Afternoon Hog report showed a gain of $1.10 as packers wanted to procure hogs for the week. The positive aspect of higher cash was offset by cutouts down $0.95. Slaughter continues to remain brisk. Hog weights decreased 0.9 pounds last week from the previous week and are running 2.4 pounds below a year ago suggesting marketings are current. December Cold Storage showed total pork inventory up 16% from a year ago at 458.1 million pounds with belly stocks up 66% totaling 63.1 million pounds. Weekly exports sales are anticipated to be good, which could provide some fundamental support.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle have been developing an uptrend as traders remain friendly to the market. | 1) | The choice/select spread is running significantly lower than a year ago which may indicate demand for higher cuts of beef is slowing. |
| 2) | Feedlots want higher cash and will hold to get it. Offers have yet to be posted in the North with lighter showlists. | 2) | Feedlots might not be willing to hold cattle over to next week. It remains expensive to feed them longer than necessary. |
| 3) | Hog futures seem to be building support with cutouts potentially near the lows as prices become choppier. | 3) | Hogs have not been able to rebound as cutout prices remain choppy. |
| 4) | Hog futures remain oversold and with funds having liquidated long positions, the market is ripe for a bounce. | 4) | There is plenty of pork in freezers and available for demand. Continued strong slaughter pace will keep demand satisfied and then some. |
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