GENERAL COMMENTS:
Even though cash cattle traded steady to higher, it was not enough to push futures higher. It was another week of limited trade as feedlots were willing to hold cattle over another week in anticipation of receiving higher cash. Packers are trying to balance the overall weakness of boxed beef with what they are willing to pay for cattle. Feedlots believe they can push packers into a corner which may result in a substantial increase in prices. Boxed beef was mixed on Friday with choice up $0.58 with select down $0.57. USDA increased the average price of steers on the WASDE report to $178.50 for this year, an increase of $3.20 from the July projection. However, they reduced their estimate for 2024 to $186, a decrease of $2.00. The Commitment of Traders report showed funds selling 4,953 live cattle contracts bringing their net longs to 95,628 futures contracts. Funds sold 1,022 futures contracts bringing their net long positions to 13,411 contracts.
Hog futures found some support Friday but not from cash or cutouts. It seemed more of a desire to position ahead of a weekend. The National Direct Afternoon Hog report showed cash down $0.03. Cutouts took it on the chin with a loss of $2.93. This does not set the stage for a strong day today with packers likely holding back with bids. Slaughter pace is strong as demand remains good, but supply is sufficient leaving packers with sufficient hogs to purchase. USDA increased the average price for barrows and gilts to $62.20, an increase of $4.30 for this year. The projected average price next year is $65.00, unchanged from the July estimate. The Commitment of Traders report showed funds increasing their net long futures positions by $3,708 contracts to a net long 34,190 futures contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | A limited amount of cattle traded last week which may mean packers will need to be more aggressive this week. | 1) | Packers seem to be holding the line anticipating feedlots will let go of cattle rather than continuing to feed them. |
| 2) | Feedlots seem determined to receive no less than steady cash and are confident holding out will net benefits. | 2) | Slaughter has been reduced to try to improve packer margins. So far it has not been enough. |
| 3) | August hogs go off the board today with October holding a large discount to cash. If cutouts find support, October may trim the discount. | 3) | The weakness of cutouts on Friday may pressure hog futures today as futures trade Friday seemed to be confined to short covering ahead of the weekend. |
| 4) | Slaughter pace is strong which should continue to pull hogs forward potentially reducing supply and support price. | 4) | Packers may not be very aggressive today as they wait to see weekend demand. |
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