GENERAL COMMENTS:
Without much fundamental action taking place in the cattle complex, prices drifted lower. That is what generally happens in most markets when there is limited immediate fundamental news to provide traders with the confidence to buy the market. Cattle supplies are tight, but that is not new news. A bull market needs to be fed or it will slowly drift lower. Cash is expected to be at least steady this week, but traders may take a wait-n-see attitude. Even with light trade last week, packers were able to purchase 21% of the total for deferred delivery. Boxed beef was higher with choice up $2.89 and select up $3.22. It may be too early to tell, but one must wonder if demand is beginning to improve after the summer slump.
Hogs could not find any traction even though cash and cutouts were strong on the morning reports. The result was not what was hoped for with cutouts losing another $1.00 with a weighted average of $109.88 by the end of the day. The National Direct Afternoon Hog report showed cash stronger but only up $0.20. October is now the front month and is substantially lower than where August stopped trading. Currently, there is no interest in reducing the discount to cash unless stability is found in both cash and cutouts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle futures are following a similar pattern to last week. If cash is steady this week, futures will move back up again. | 1) | Cattle futures are in a consolidation phase, and it seems it may be difficult to retest the highs under the current market situation. |
| 2) | Stronger boxed beef prices may signal a turn in demand or that slower slaughter is resulting in the rise of beef prices which will improve packer margins. | 2) | Cattle slaughter last week was the lowest it has been so far this year and down 42,000 head from the previous year. |
| 3) | Slaughter is lighter than a year ago with some thinking the hog numbers are not as plentiful as they had been. | 3) | Hog futures continue to show weakness potentially testing the low of June 30 before technical support might be uncovered. |
| 4) | Packers should be aggressively looking for hogs again today as they would like to get supply on the books sooner rather than later. | 4) | The weakness of cutouts may indicate demand may be slowing somewhat as the calendar moves closer to the end of summer. This may limit upside price potential. |
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