GENERAL COMMENTS:
Traders did not want to wait around to see what cash would do and bought futures aggressively. It seems they wanted to reduce some of the discount the market is holding to cash and felt comfortable buying even though cash may trade steady this week. The increase was not enough to change the trend, but it provides hope for further upside potential. Boxed beef prices did not provide much support with prices mixed with choice down $0.66 and select up $0.08. The upcoming Cattle on Feed report and the potential for steady cash trade may limit upside price potential. Feeder cattle follow the strength of live cattle as usual. There was little else to move the market.
The February and later hog contracts moved above the recent highs turning the trend higher. This may increase the buying interest of technical traders. The October and December contracts have not yet resumed the uptrend but may revisit the highs. The National Daily Direct Afternoon Hog report showed a gain for the second day with an increase of $0.37. It is anticipated the packers may not be finished buying for the week with higher prices again today. Pork cutouts gained $0.78 providing further support to the market.
| BULL SIDE | BEAR SIDE | ||
| 1) | Traders may further reduce some of the discount the market is holding to cash. The anticipation is for steady cash trade this week. | 1) | The upcoming Cattle on Feed report may temper the exuberance of traders due to the uncertainty of placements. |
| 2) | Feedlots may hold tight to higher asking prices as long as there is support in the futures market. The packers did not purchase many cattle for deferred delivery last week. | 2) | Boxed beef prices continue to struggle which may limit the upside price potential for cattle futures and cash cattle. |
| 3) | February and later hog contracts moved and closed above the previous highs. This may trigger further buying interest from the technical traders. | 3) | The October and December hog contracts may have difficulty pushing above the previous highs without further strength from underlying cash. |
| 4) | Better cash and cutout prices so far this week have provided renewed support for the market. The packers may need more hogs and may be aggressive buyers today. | 4) | Hog supplies remain plentiful with weights continuing to run higher than a year ago. The packers continue to obtain sufficient supplies without having to chase the market higher. |
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