Lower cash cattle trade for the week put pressure on the market. Packers continue to purchase cattle for immediate needs and deferred delivery, leaving them in a strong position. Cash cattle traded $2.00 lower for Northern dressed and Southern live last week. Feedlots needed to move cattle and lower prices were taken to avoid further losses. Boxed beef prices continued to weaken with choice down $2.10 and select down $0.66. Cattle futures may move to the lows of a few weeks ago before finding some strong technical buying interest. Fundamentally, the market could break below that level. The Commitments of Traders report showed the funds as net buyers of 1,007 live cattle futures, bringing their net-long positions to 42,663 contracts. The funds were net buyers of 2,305 feeder cattle futures contracts, reducing their net-short positions to 1,262 contracts.
Hog futures showed bear spreading as the optimism for nearby contracts dissipated. Lower cash weighed on the market along with weekly export sales 51% below the previous week. The National Daily Direct Afternoon Hog report showed cash down $1.05. The packers continue to have sufficient hogs available without having to be aggressive. Cutouts increased by $1.23, which may provide support to the market Monday. The fund traders remain bullish on the market as the Commitments of Traders report showed them as net buyers of 10,423 futures contracts, bringing their net-long positions to 42,430 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle futures are nearing technical support, which could trigger short-covering and renewed buying interest. |
1) | Cattle futures could retest the previous lows and possible contract lows this week. |
| 2) | Cattle numbers remain low and are expected to remain that way for the rest of the year. The packers may not be able to purchase ahead for very long before they are aggressive buyers again. |
2) | The packers seem to have a sufficient supply of cattle for current needs and purchase for deferred delivery. They do not need to be aggressive in the cash market. |
| 3) | Fund traders have increased their long positions, believing hog fundamentals will remain friendly and higher prices will unfold. |
3) | Nearby hog futures had outpaced cash and are now correcting as some optimism has waned for the time being. |
| 4) | The large Saturday slaughter may cause the packers to be aggressive as they need to purchase hogs to maintain the strong slaughter pace and satisfy demand. |
4) | The strong Saturday slaughter may result in the packers not needing to be aggressive early this week as pork supply may be plentiful. |
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