GENERAL COMMENTS:
Buying interest surfaced in the cattle complex resulting in both live cattle and feeder cattle futures basically eliminating the losses of Monday. Traders looked to bottom-pick the market in the hopes that the oversold condition would provide some profit on a bounce. Futures hold a discount to cash, but that discount is now less than it was over the weekend. Some light cash trade took place yesterday at $171 live with some dressed trade in Nebraska at $271. These are $3 to $4 lower than last week. Feedlots are not banding together to hold out for at least steady prices but wanted to move cattle rather than risking further losses. Boxed beef did not help matters any with choice down $1.24 and select down $3.70. The trend of boxed beef is lower reflecting demand weakness.
Hogs could not hold onto the gains of Monday with weakness right from the start. Higher cutouts on Monday were not enough to provide support as traders seemed to focus on cash. The anticipated pattern of higher cash on Tuesday did not materialize as the National Direct Afternoon Hog report showed a decline of $1.70 moving the weighted average down to $53.83. Cutouts were up $0.24 but that may not be able to have a bullish impact on the market today. Packers seem to be on the defensive and may not pay up for hogs if they are able to obtain what they need with being aggressive.
| BULL SIDE | BEAR SIDE | ||
| 1) | Live cattle futures hold a discount to cash even if cash trades lower this week. This may support futures for the time being. | 1) | Boxed beef has been struggling and trending lower reflecting lower demand. This may continue through the end of the year. |
| 2) | Both live and feeder cattle futures erased the losses of Monday which could result in extended gains today as short covering and further buying takes place. | 2) | Early lower cash cattle trade is reflective of lower boxed beef prices and reduced demand. Feedlots are moving cattle rather than risk holding only to sell at further reduced prices. |
| 3) | April hogs still have the chart gap above the market that needs to be filled. Any stability of cash could make this happen. | 3) | Cash hogs have been struggling with the weighted average continuing to decline. |
| 4) | Demand seems to be holding as pork cutouts have posted gains so far this week. | 4) | The lower opening of hog futures and the lower low on Tuesday may tip the market back down again as it tries to find the supply/demand balance. |
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