GENERAL COMMENTS:
Cattle futures made a valiant effort to regain some of the losses of Friday. Some believed the market was overdone and impacted by lighter holiday trade. That certainly was not the case as selling increased and the market plummeted. Fund liquidation ran rampant for another day but may temper today as this type of selling generally runs for two to three days. Live cattle futures had about a $4.00 price swing on Monday while feeder cattle futures had an $8.00 to $9.00 price swing. The market is oversold, but that does not mean a huge retracement will take place. Packers will use this to their advantage and bid lower this week. Boxed beef showed weakness with choice down $0.78 and select down $0.96. The Commitment of Traders report showed funds sold 2,721 live cattle futures contracts as of November 21st bringing their net long positions to 35,170 contracts. They sold 1,777 feeder cattle futures moving them to a net short of 458 contracts.
December hog futures were able to close in positive territory as they moved closer to settlement, but the rest of the contracts showed further pressure, taking February nearly $1.00 below December. February, April, and May closed at new contract lows. Hog numbers are sufficient with no apparent tightness of supply. Packers did step up yesterday to purchase hogs after the holiday week as they needed hogs to get back on track with slaughter. The National Direct Afternoon Hog report showed cash increasing $1.36 to a weighted average price of $58.85. Cutouts had a strong day with a gain of $4.58 supported by a $17.61 gain in bellies. The strength of cash and cutouts should provide some support to the trade today. The Commitment of Traders report as of November 21st showed funds selling 13,867 futures contracts moving them to hold a net short position of 416 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle futures are oversold and should see a bounce as there have been two days of heavy selling. | 1) | Traders will not be very willing to step back into the cattle market in a big way as the sell-off has been brutal and the market unpredictable. |
| 2) | Cattle futures hold a substantial discount to cash which likely will not be maintained for very long. Heavy selling should subside. | 2) | Cash is expected to trade lower this week as packers will bid lower due to the huge losses in cattle futures. |
| 3) | Stronger cash and cutouts should provide support to the hog market today as traders generally traded the previous days' numbers. | 3) | Packers aggressively bid for hogs on Monday, but the pattern has been that that is short-lived and once they procure sufficient supply, cash falls back. |
| 4) | Hog futures are oversold and should see a bounce as nearby months carry a substantial discount to the index. | 4) | Demand seems to remain lackluster despite the lower pork prices. This may keep pressure on the market. |
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