GENERAL COMMENTS:
Cash cattle showed a second week of substantial gains with Northern cattle trading $10.00 higher while Southern cattle were $7.00 to $8.00 higher. It is incredible that demand remains as strong as it is as retail prices continue to climb. The market is trying to find a level at which demand will slow to become more in line with tight supplies. This is great for the feedlots as profitability improves. It is doubtful cash will be as strong this week as it has been the past two weeks, but that will be up to demand and whether cattle have been purchased for deferred delivery. Boxed beef prices continue to climb with choice up $4.20 and select up $1.61 Friday. USDA raised the average steer price on the WASDE report Friday by $5.20 from their May estimate to an average this year of $171.70. They raised the projected price next year to $182.00, an increase of $8.00 from their previous estimate. Feeder cattle showed a greater loss last week than live cattle as the market corrected from being overbought. They may see pressure Monday due to strong gains of corn in overnight trade. The Commitment of Traders report showed funds increasing their net-long live-cattle futures positions by 7,477 to a net long of 112,803 futures. Feeder cattle showed an increase of 569 long positions, bringing their net-long futures positions to 17,031.
Hogs had an impressive week with July closing at the highest level since May 3 and leaving two chart gaps in its wake. June futures showed a nice gain, but the strength was minimized due to the contract ceasing trading Wednesday and the price needed to remain close to the index. Packers were aggressive until Friday when cash fell $8.60 on the National Direct Afternoon Hog report. However, this was offset to some extent by cutouts showing a gain of $2.71. USDA made little adjustment on the WASDE report for hog prices. They raised the average price this year to $56.70, an increase of $0.10. They left the projection for next year unchanged at $62.00. The Commitment of Traders report showed funds trimming their short positions by 16,701 contracts bring their net-short futures positions to 18,741 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong cash is expected to continue to support the market. Feedlots will look for more again this week. | 1) | Cattle futures turning lower in the face of a second week of strong cash may indicate a turn in trend as demand may begin to slow. |
| 2) | Strong boxed beef indicates demand remains strong even at these higher prices. | 2) | High prices cure high prices and we may be seeing this in the export market as export sales were 29% lower than the previous week. |
| 3) | Pork demand has increased, resulting in packers being more aggressive in their purchases over the past two weeks. | 3) | Hog futures have chart gaps below the market, which generally are filled at some point in the life of the contract. |
| 4) | Packers may be aggressive to begin the week again in an effort to purchase sooner rather than later. | 4) | Packers may not be as aggressive this week if Friday provides any indication of their desire to purchase hogs this week. |
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