GENERAL COMMENTS:
Cash cattle traded in line with the direction set earlier in the week with Southern trading $1.00 to $2.00 lower than the previous week at $177 with Northern dressed cattle $1.00 lower at $180. That should not have had the impact seen in the market on Friday. Lighter holiday trade and technical selling took place pushing futures to the lowest level since May in the December live cattle contract and the lowest since March in later contracts. Feeder cattle futures moved to the lowest level since March. There is a good chance futures will rebound to some extent today, but traders may be reluctant to buy back in with any aggressiveness. A positive was that boxed beef was higher on Friday with choice up $1.03 and select up $1.14.
Hogs were under pressure on Friday due to spillover selling as well as fundamental pressure. Cash and cutouts continue to struggle having a difficult time finding consistent support. The National Direct Afternoon Hog report showed cash down $1.70 pushing the weighted average down to $57.49. Cutouts suffered as well with the value declining $0.51. Packers may want to purchase hogs today more aggressively to make up for lighter activity last week and get back on track for slaughter, but they may not need to be overly aggressive depending on product movement.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle futures were likely overdone on Friday due to lighter holiday trade and may rebound somewhat today. | 1) | The technical breakdown in the cattle market will be difficult to overcome as price bounces may be viewed as selling opportunities by technical traders. |
| 2) | Higher boxed beef on Friday may provide some buying interest today from traders anticipating better demand through the end of the year. | 2) | Packers will not be too anxious to bid up for cattle due to the breakdown of futures. They will use it to their advantage. |
| 3) | Packers may step up more aggressively today to purchase hogs now that a full week of slaughter needs to be filled. | 3) | Continued weakness of cash hogs will keep pressure on the market. There is little reason for packers to bid up aggressively to purchase supply. |
| 4) | February and later hog futures left a chart gap on the open on Friday that may be filled at some point. | 4) | New contract lows in February and April hog futures do not bode well for the market in the near term. It may keep traders cautious over buying back into the market aggressively. |
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