Traders had nothing to go on as they waited for cash trade. A limited amount of cattle traded in Nebraska Wednesday at $286 dressed, but nothing else took place. This light activity provides no solid direction for the market. It is likely limited cash trading will surface Thursday as feedlots and packers push each other into a corner. Boxed beef has not performed very well so far this week with prices mixed Wednesday. Choice was down $0.48 while select jumped $3.41. There has been anticipation cash may trade $1.00 higher, but that may be fading as the market has that factored in and feedlots that have been carrying cattle over the past few weeks may be willing to move them rather than hold another week. Further pressure may unfold in feeder cattle as it retraces from contract highs.
Hog futures unwound some of the spreads again Wednesday after two days of buying October and selling later contracts. That was reversed again Wednesday with this flipping of the spread nearly a daily occurrence. The National Daily Direct Afternoon Hog report showed cash finally gaining some traction with an increase of $0.53 with a weighted average of $79.09. However, cutouts fell back with a loss of $2.98. Hog slaughter is lower, but weights are higher. Hog weights jumped 3.3 pounds last week to an average of 279.0 pounds. This would be expected as hog appetites rebound from hot weather. Although the increase is significant, weights remain 1.0 pounds below a year ago. Saturday hog slaughter is estimated at 149,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Traders took some profits as higher cash is already factored in with some concern developing over the possibility cash may not trade higher. |
1) | Sometimes the market looks most bullish at the top and cattle may be near that level. Further weakness could trigger some liquidation. |
| 2) | Feeder cattle remain in strong demand at auctions with supply tight. Cattle numbers will remain tight for quite some time before the herd is rebuilt. |
2) | Continued weakness of boxed beef could have packers reduce slaughter further, leaving supply more readily available even though numbers are tighter. |
| 3) | There is some evidence hog runs may be tightening, which may increase the need for packers to be more aggressive in the cash market. |
3) | Packers continue to find sufficient hogs for their needs without having to chase after them. This leaves them less aggressive in the cash market. |
| 4) | Even with the decline of cutouts Wednesday. Prices are up for the week, which may indicate an uptrend of cutout values may be unfolding as consumers look for value at the meat case. |
4) | Pork prices are up 27% in California already compared to a year ago with consumption lower and the full implementation of Prop 12 is yet to come. This may limit upside price potential. |
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