GENERAL COMMENTS:
Cash cattle have not traded as the standoff continues for another week. Feedlots believe they will be able to receive higher prices due to the strength of boxed beef. They feel packers will need to step up to purchase to supply the market. Smaller show lists also provide feedlots with some confidence for higher prices. Packers are seeing better margins but want to keep or improve those margins. There may be some trade today, but it is expected to be very limited. Boxed beef showed choice unchanged from the previous day at $317.05 with select up $2.08. The buying interest for feeder cattle recently has been tempered a bit which is likely the result of the choppiness of futures. Weekly export sales will be released this morning but may have limited impact on trading as the focus is cash.
Hog futures were unable to find support with both cash and cutouts down again yesterday. The nearby October discount to cash is narrowing but not in a supportive way. Cash continues to decline, and futures continue to decline but at a slower pace. October futures are now $10.00 under cash while they had been over $20 under cash not too long ago. The National Direct Afternoon Hog report showed a decline of $1.33 with the weighted average at $88.42. Cutouts fell again yesterday posting a loss of $2.86. The positive aspect yesterday was July inventory of frozen pork was down 10% from a year ago. Saturday hog slaughter is estimated at 140,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Show lists are smaller this week which may require packers to step up to purchase what they need and for deferred delivery. | 1) | Cattle futures have been struggling and unable to resume an uptrend. The market may have run out of steam as traders turn cautious. |
| 2) | Boxed beef continues to show strength improving packer margins allowing them to spend a little more to obtain the supply they need and to keep ahead by purchasing for deferred delivery. | 2) | The friendly Cattle on Feed report failed to generate strong buying interest with the results already factored in at current prices. |
| 3) | A decrease of pork in cold storage during July indicates demand was good and increased slaughter pace was not adding to stocks. | 3) | Pork cutouts continue to decline putting pressure on cash and futures. |
| 4) | Three days of liquidation may have run its course with some hog futures contracts at a support level. The second half of the week could provide some short covering again. | 4) | If hog futures move below the lows of yesterday and below technical support, further liquidation may be triggered. |
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