GENERAL COMMENTS:
Cash cattle trade should take place today as packers will need to purchase supply ahead of Thanksgiving. Only a handful of trades have been made providing no real direction for cash. The inability of cattle futures to hold gains on Tuesday gives the impression traders are not too hopeful for stronger cash. Sure, the Cattle on Feed report was neutral to friendly, but cash trading may not be influenced by the report. Packers are trying to improve margins as they assess boxed beef movement and prices. Boxed beef prices on Tuesday were mixed with choice up $0.06 and select down $2.18. Feeder cattle made a valiant attempt to trade higher but the inability to gain more than they had earlier in the day triggered more aggressive selling with contracts closing nearer the lows of the day.
Hog futures opened lower and never moved into positive territory throughout the day. Once futures broke below the support of the sideways trading range, more aggressive selling erupted, stops were triggered, and technical selling increased. It was anticipated cash might be lower after the aggressive buying by packers on Monday. Cash was substantially lower as the National Daily Direct Afternoon Hog report showed a decline of $6.19 moving the weighted average to $61.03. Cutouts faltered as well with a decline of $0.88. Futures may see a little short covering ahead of the holiday but likely nothing dramatic. Saturday slaughter is projected at 344,000.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle futures held technical support on Tuesday bouncing back into the recent trading range. Further short covering could bounce the market. | 1) | Cattle futures may have a difficult time trending higher due to demand uncertainty. |
| 2) | Steady cash cattle trade would be supportive and likely increase trader buying interest in futures. | 2) | Further weakness in cash cattle could increase the selling of futures ahead of the holiday season. |
| 3) | Traders may not press hog futures further to the downside ahead of the holiday. Recent short positions may be liquidated due to market uncertainty. | 3) | Hog futures breaking below support may make it difficult to rebound in the near term. |
| 4) | Lower pork prices should stimulate domestic and international demand, keeping supply from backing up in the market. | 4) | Hog futures may remain under pressure the rest of the week as cash is expected to decline further as packers may have purchased much of what they need. |
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