GENERAL COMMENTS:
Cattle futures just could not maintain any of the strength after the lows were reached earlier in the week. This weakness may set the stage for lower cash again this week. Packers will likely use this weakness to bid lower as feedlots may want to move cattle before price drops further. Contract lows will need to hold, or more technical selling will erupt. Cash cattle trade on Friday was in line with the week which should have been factored into the market. It seemed like it was end of the week selling as traders were uncertain over further upside potential in the near term. Feeder cattle plummeted and closed near their previous lows. The Commitment of Traders report showed funds trimmed their net long live cattle futures positions by 2,479 contracts, moving to a net long of 32,691. Feeder cattle showed funds selling 721 contracts moving them to a net short of 1,179 contracts.
Hog futures declined but look better technically. However, it seems that upside price potential may be limited by the weakness of demand. The National Daily Direct Afternoon Hog report showed a decline of $3.00 moving the weighted average down to $55.60. Packer margins have improved and are now back above the three-year average. However, this may not make them more willing to pay more for hogs unless market ready supplies tighten. Cutouts showed weakness with a decline of $0.28. Packers are not expected to be aggressive to begin the week as they assess weekend demand and hog supplies. The Commitment of Traders report showed the fund sold 14,327 futures contracts moving their net short positions to 14,743 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Selling in the cattle complex seemed to be more tied to weekend liquidation and technical selling. Traders could buy more aggressively today. | 1) | Cattle futures were unable to follow through on the buying of the week as upside potential may be limited. |
| 2) | Cattle futures hold a discount to cash. Any stability of cash cattle would provide support to the market. | 2) | Cash is anticipated to be lower again this week as packers pull back due to the weakness of futures. They may use it to their advantage. |
| 3) | Traders may feel more confident buying into the hog market to begin the week in anticipation of better demand. | 3) | Cash and cutouts were lower on Friday which may be what traders will focus on in hog futures today. |
| 4) | Improving packer margin for pork may stimulate greater buying interest at higher prices if demand improves. | 4) | Pork demand continues to remain lackluster which may keep upside price potential limited. |
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