GENERAL COMMENTS:
Cattle traders had been waiting for something to support the market and they got it Friday as cash traded higher. Thursday showed light trade at higher prices and was confirmed Friday with Southern cattle trading $1.00 higher and Northern dressed trading $4.00 higher. This was the catalyst needed for traders to buy into the market. The strength began on the open with futures gapping higher and they never looked back. Along with higher cash, boxed beef prices were also strong with choice up $1.58 and select up $4.56. Demand remains strong with packers needing to purchase cattle and maintain a strong slaughter pace. The Commitments of Traders report showed funds selling 3,571 live cattle futures contracts with their net-long positions totaling 53,071 contracts. Funds were net sellers of 358 feeder cattle futures contracts with their net-long positions at 2,978 contracts.
Hog futures had a huge reversal from new lows Friday with higher cash and cutouts triggering short-covering ahead of the weekend. Technically, the market may not be in a strong position as futures posted a lower low and lower high, even though the market found support. However, cash increased by $0.74 on the National Direct Afternoon report, indicating packers needed more hogs to fill the week. On top of that, cutouts were very strong with a gain of $4.33 and a huge increase in bellies of $16.58. The gain of cutouts must be viewed with caution as this happened earlier in the week with the strong gains eliminated over the next few days. However, it should be enough to trigger further buying of futures Monday. The Commitments of Traders report showed funds selling 10,421 futures contracts, bringing their net-long positions to 8,605 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle futures pushed through and closed above chart resistance Friday. This may result in further buying interest from traders. |
1) | Live cattle and feeder cattle contracts left a chart gap on the open Friday that may be filled sooner rather than later. |
| 2) | Higher cash and strong boxed beef prices indicate demand continues to remain strong. |
2) | Hotter weather is being seen across much of the country, which may reduce beef demand. |
| 3) | Hog traders may have decided enough is enough and decided to cover short positions ahead of the weekend, being unwilling to press the downside further. |
3) | New contract lows were seen in hog futures Friday with contracts posting a lower low and lower high. That is not a strong technical buying signal. |
| 4) | Lower pork prices may have increased demand, resulting in higher cutouts. This trend may continue. |
4) | Strong pork cutout prices will need to be held or futures will fall back. The strength from Friday would be short-lived. |
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