GENERAL COMMENTS:
Traders were more confident in the cattle market Tuesday as boxed beef prices have been showing strength recently. Stronger boxed beef prices may increase the interest of packers to pay no less than steady cash prices this week. That assumption is influencing the futures market ahead of actual cash trade. Feedlots in the South have posted some offers, but otherwise bids or offers have been elusive. The futures market has been struggling to find solid support after the large decline two weeks ago. Live cattle futures have fared better than feeder cattle with contracts moving in a sideways range while feeder futures trend lower. Boxed beef prices were higher Tuesday with choice up $1.10 and select up $0.44. Cash cattle trade may not take place today as packers have a fair amount of cattle purchased ahead and may not be aggressive.
Hog futures fell below technical support Tuesday, which may result in further selling. Wednesday is the last day to trade the August contract with October taking over as the lead month, carrying a large discount. Traders may want to close the gap through spread trading by buying the nearby and selling deferred contracts. The National Direct Afternoon Hog report showed cash up $0.69. Pork cutouts gained $0.06. This does not build much confidence in pork demand remaining strong. The packers should remain aggressive Wednesday and pay higher prices to obtain most of the hogs needed for the week.
| BULL SIDE | BEAR SIDE | ||
| 1) | Boxed beef has been showing consistent strength recently, indicating consumer demand is improving. |
1) | Cattle futures have been unable to regain much of what was lost during the large selloff. The decline was fundamental and not just technical in nature. |
| 2) | Stronger beef and lower feed prices may provide confidence for feedlots to hold for no less than steady cash. |
2) | Higher beef prices may have tempered both domestic and international demand. Prices may have been too high for too long. |
| 3) | The discount of hog futures through the end of the year seems excessive and may increase the buying interest of traders after August goes off the board Wednesday. |
3) | The weakness of hog futures Tuesday pushed some contracts below technical support, which could increase the selling interest.. |
| 4) | The packers continue to run a strong slaughter pace as margins are good and hogs are readily available. |
4) | The deferred hog futures contracts may hold the large discount unless proven otherwise. The estimates on the WASDE on Monday did not provide much support for higher prices. |
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