GENERAL COMMENTS:
Cattle trade had been dominated by lower cash and traders trying to determine the outcome of the Cattle on Feed report. The Cattle on Feed report was neutral to friendly. The friendly aspect of the report was that placements were 104% of a year ago with the estimate at 106.1%. The fact that the actual was below the estimate is friendly even though it was higher than a year ago. It was within the range of estimates. The neutral aspect of the report was that on-feed numbers were at 102% from a year ago compared to the estimate of 101.9% and marketings were one percent lower than the estimates at 97% of a year ago. With the large decline of futures since the previous report, futures could see a rebound today due to the friendly placement number. It is a holiday-shortened week which could leave packers less aggressive as they have already purchased some cattle for the first week of December. Boxed beef prices were mixed with choice down $0.85 and select up $3.05. The Commitment of Traders report showed funds selling 18,463 of their long futures position bringing their net long position to 37,891. Feeder cattle showed funds with a net long position of 1,319 with funds buying 1,507 contracts during the week.
Hog futures were mixed with pressure on the nearby months. Trading last week managed to keep hog futures in a sideways pattern. There was quite a divergence between cash and cutouts on Friday. The National Direct Afternoon Hog report showed a decline of $2.19 moving the weighted average down to $61.80. Cutouts showed a nice gain of $2.24 supported by the $13.52 gain in the picnic cutout and a $9.99 increase in bellies. The question is whether cash or cutouts will have the greater impact on trading. Packers may be more aggressive today as they may want to purchase hogs early in the week due to the Thanksgiving holiday. The Commitment of Traders report showed funds reducing their net long futures positions by 63 contracts with their net long positions now at 13,451.
| BULL SIDE | BEAR SIDE | ||
| 1) | The Cattle on Feed report showed placements 4% above a year ago, but 2.1% lower than the average trade estimate. Traders will trade the estimate which should result in higher futures. |
1) | The placement number on the Cattle on Feed report being 4% higher than a year ago is still a hefty number with more slaughter cattle being available for slaughter down the road. |
| 2) | Cattle futures showed gains for the week despite the decline in cash cattle of $2 to $4. Traders might see this as a buying opportunity. | 2) | Boxed beef continues to struggle without consistent demand to keep prices trending higher. |
| 3) | Pork cutouts showed a nice gain on Friday which may provide support to the market today as lower hog prices might be improving demand. | 3) | The continued weakness of cash hogs is a concern as cash is near the $60.00 level and could fall below. Packers can get what they need without having to be aggressive. |
| 4) | Hog futures remaining in the sideways range might be building longer-term support. | 4) | Hog futures remaining in a sideways trading range may be building greater upside price resistance. |
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