GENERAL COMMENTS:
Cash cattle have not yet been traded. This has provided traders with the optimism for higher cash. Feedlots are holding out with the expectation that packers will step up to procure the cattle they need. The delay of cash trading until Friday generally takes place the week of the Cattle on Feed report. The increase in futures adds to the resolve of the feedlot while the continued weakness of boxed beef may limit what packers will pay. Boxed beef prices were lower with choice down $1.82 and select down $1.49. Futures may trade mixed today as traders position themselves ahead of the Cattle on Feed report. The average estimate of cattle on feed on September 1 is 100.7% of a year ago with the range of estimates from 100.1% to 101.3%. August placements are estimated at 98.5% with a range of 93.5% to 102.3%. Cattle marketed in August are estimated at 96.5% with a range of 96.0% to 97.5%.
Hog futures contracts through April closed higher keeping the recent uptrend intact. Support stemmed from packer interest and higher cash prices. The National Direct Afternoon report showed cash up $1.39 which was not expected. Cutouts found support as well posting a gain of $0.40. The fund traders have been supporting the market and as long as demand holds and the technical studies are positive, they may continue to do so. Saturday slaughter is estimated at 135,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Feedlots seem intent on holding out for higher cash. The packers may need to pay more to procure the cattle they need as they do not have many purchased ahead. | 1) | If cash cattle trade at only steady cash, it may be a disappointment to the trade. It may trigger selling pressure. |
| 2) | There may be further short covering ahead of the Cattle on Feed report as traders position themselves to reduce exposure. | 2) | Boxed beef continues to show weakness with choice cuts falling below $300 again. The decline in interest rates may have a limited impact on demand. |
| 3) | Hog futures have maintained the recent uptrend despite the variability of cash and cutouts. | 3) | The packers likely have sufficient hogs purchased for the week and may not be aggressive today. Lower cash is expected. |
| 4) | Pork export sales of 29,000 were 3% below the previous week but are still good sales and indicated continued strong international demand. | 4) | The supply of hogs remains plentiful with weights higher than a year ago. This may keep the cash price rangebound and futures showing limited upside potential. |
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