GENERAL COMMENTS:
Cattle futures closed with minor strength but not until lower lows were made for the fourth consecutive day. Traders are still uncertain about the news stories of last week and the longer-term effects. The strength of boxed beef was supportive, with choice cuts gaining $2.40 and select cuts up $1.99. However, that may not be enough to cause the packers to become more aggressive this week. Last week, they were able to purchase some cattle ahead, putting them in a better bargaining position. If demand holds this week, they may need to step up and buy more aggressively. Feeder cattle prices are becoming more variable at auctions as some buyers are holding back due to the high prices and the concern over live cattle prices in the future.
Hog futures tried to push higher but could not uncover further buying interest, with contracts falling back into negative territory and near the bottom end of the trading range. It will be critical for support to hold or more fund liquidation may be triggered. Buyers were aggressive in the country on Monday, with the National Direct Afternoon Hog report showing cash up $2.45 with a weighted average of $89.35. Cash is expected to be higher today as packers intend to purchase supplies early to maintain slaughter. Unfortunately, cutouts declined $1.82, which is not a good indication of strong weekend demand.
| BULL SIDE | BEAR SIDE | ||
| 1) | Much of the negative news of last week should have been digested with traders again focusing on tight cattle supplies. | 1) | Live cattle futures made a lower low again on Monday which may keep the trend negative. |
| 2) | Packer may be more aggressive in cash trading this week due to strong boxed beef prices as they need to purchase cattle to supply demand. | 2) | The packers will not be anxious to purchase cattle this week for lower prices. Lower cash last week may have set the direction for this week. |
| 3) | Hog futures remained in the sideways range and possibly building support. The packers may be aggressive in the cash market as they seem short-bought. | 3) | If hog futures cannot hold support, further fund liquidation may result in lower prices. |
| 4) | The strong slaughter pace is keeping hogs from backing up. Higher hog weights than a year ago are not reducing the interest of packers. Demand seems to be stronger than believed. | 4) | Pork cutout prices continue to struggle unable to find solid support. The variable prices support the concern over slower demand. |
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