GENERAL COMMENTS:
Cattle futures opened lower on Monday and then made a valiant effort to move higher bringing futures to nearly unchanged. However, selling pressure quickly pushed contracts back to triple-digit losses. The market is in a bearish mode and lower demand is not helping. No bids or offers of cash have been floated yet but cash is anticipated to trade no better than unchanged with most thinking it will be lower again this week. It is not a matter of more cattle being available, but rather the fundamentals of slower demand. Boxed beef prices were lower yesterday with choice down $2.74 and select down $2.66. live cattle futures broke through and closed below support from back in March. Feeder cattle made new contract lows across the board.
Hogs spent Monday in positive territory except for front-month December. December has about a week remaining for the contract and will remain close to the index. The strength Monday was not due to stronger cash as that was lower on Friday and lower on Monday. The National Direct Afternoon Hog report showed a decline of $0.07 moving the weighted average to $55.53. Cutouts moved higher on Monday with an increase of $0.88. There is greater optimism for increasing domestic and international demand moving through the month which is supporting the market. If the pattern of the last few weeks is repeated, packers should be more aggressive paying higher cash today.
| BULL SIDE | BEAR SIDE | ||
| 1) | There is still a chart gap way above the current market in live cattle contracts. Chart gaps usually or filled sometime during the life of the contract. | 1) | Live cattle closing below support and feeder cattle making new contract lows may keep the market bearish. |
| 2) | Lower cash this week is already more than factored in, which could bounce the oversold market. | 2) | Boxed beef continues to trend lower indicating slower demand. This may not change much through the end of the year. |
| 3) | April hogs have a chart gap above the market at 78.37 that may be closed possibly today. | 3) | The weighted average of cash hogs continues to trend lower. This may limit the potential for the market. |
| 4) | Packers are expected to pay higher cash for hogs following the pattern of recent weeks and due to better packer margins. | 4) | Once the chart gap is closed in the April contract, technical selling may increase as fundamentals point to limited upside potential. |
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