GENERAL COMMENTS:
Cattle futures did what they were expected to do and that was to trade higher because of the Cattle on Feed report. Futures gapped higher with August and October live cattle contracts closing the gap as the day progressed. December and later contracts still hold their lower chart gaps. The strength of contracts by the end of the day was a bit disappointing based on the bullishness of the report. Traders remain uncertain over cash price strength this week with hopes of at least steady money. Boxed beef was lower to start the week following the strength of last week. Choice was down $0.55 with select down $1.03. This should have little influence on trading today as traders will be focused on cash trade that will probably be delayed until the end of the week.
Hog futures were on the defensive as pressure from lower cutouts on Friday weighed on the market. Added to that, cash was lower on the midday report and closed lower for the day down $1.87 on the National Daily Direct Afternoon Hog report. The rally on Friday was not supported by fundamentals resulting in lower trade yesterday. However, the market did hold up well as slaughter remains strong keeping hogs from backing up in the country. Cutouts were down again posting a loss of $0.97 which may result in further weakness today. The market is having difficulty finding consistent support leaving it vulnerable to selling.
| BULL SIDE | BEAR SIDE | ||
| 1) | August and October cattle contracts were able to close their chart gaps yesterday eliminating the need to revisit those prices and leaving the way open to the upside. | 1) | The strength of cattle futures yesterday was a bit disappointing based on the numbers in the Cattle on Feed report. The market had it factored in and is focusing on the potential for lower cash again this week. |
| 2) | The report showed tight cattle numbers will be with us for an extended period providing support for continued strength. | 2) | Packers are seeing better margins and will fight to keep those improved margins which may mean lower cash. |
| 3) | Hog futures held some of Friday's gains even though fundamentals did not provide much support. Futures may have adjusted to current fundamentals and could trade in a range. | 3) | Hogs did not see cash strength indicating packers have plentiful hogs available and are able to purchase them without having to be aggressive. |
| 4) | October hogs continue to hold a large discount to cash which may limit downside risk. | 4) | Traders see little reason to push October futures higher to close the discount to cash. Cash continues to show weakness, leaving the market in a bearish posture. |
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