GENERAL COMMENTS:
Cattle futures opened higher and spent some time in positive territory, but the trade lacked conviction. The idea that steady cash this week might support the market seemed to lose some luster. Traders may need to see higher cash to get excited about buying into the market. Cash activity may not take place until late in the week due to the Cattle on Feed report being released on Friday. The general pattern has been that most activity usually takes place on the day of the report. There was some hope for higher boxed beef on the midday report, but prices declined with choice down $0.34 and select down $2.03.
Hog futures found support after trading began. Futures broke above the sideways trading range that developed last week but could not hold the strength slipping back to the top end of the range. Higher cash and cutouts may provide sufficient support resulting in further support for futures today. The National Daily Direct Afternoon Hog report showed cash up $0.96. Cutouts gained $0.32 showing gains in categories except hams. The interest from the packers on Monday is a good sign that they may remain aggressive today and maybe much of the week as they need to procure hogs for processing.
| BULL SIDE | BEAR SIDE | ||
| 1) | If cash cattle trade is no worse than steady this week, it should provide support to the market as traders may believe the low is established. | 1) | Boxed beef prices continue to struggle and a reflection of reduced demand. The reduced slaughter pace has not been able to improve prices. |
| 2) | Cattle numbers remain tight and there is concern over the possible redeveloping drought in the Southwest over the past month due to abnormally dry conditions. | 2) | Traders may remain cautious for the week with little reason to push the market one way or the other ahead of the Cattle on Feed report. |
| 3) | Hog futures have recently trended higher and may move above the trading range that developed last week. This could increase buying interest. | 3) | The inability of hog futures to hold the gains after breaking above the sideways range on Monday may indicate the market has limited upside potential currently. |
| 4) | Cash is expected to be higher today following the strength of Monday. The packers seem to need hogs and will be more aggressive in procuring what they need early in the week. | 4) | Hog numbers are plentiful, and packers have little reason to be concerned over supply. This limits their aggressiveness in the cash market despite a strong slaughter pace. |
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