Live cattle futures held well again yesterday in
spite of the significant decline of feeder cattle futures. Traders were
willing to hold out another day as the Cattle-on-Feed report looms.
Their resolve may be tested today as the market has consolidated for
over a week. Further declines in boxed beef may be in focus more as
trading activity opens today. Support for the complex stems from cash
cattle trading $1 to $2 higher this week, but that may not be a factor
in today's trading activity. However, the fact that cattle are current
with slaughter in October one percent above a year earlier at 2.98
million head with weights down 3 pounds from a year ago is keeping
support under the market. It may take lower than expected supply on the
report this afternoon in order to move prices higher. Otherwise, some
premium could be taken out of the market rather quickly as funds may
liquidate.
Heavy selling may have run its course with
futures finally closing higher after six consecutive days of decline.
The report that Beijing wants to meet with U.S. trade representatives
sent futures higher early, but the exuberance dissipated as the day
progressed. However, this may have set the stage for trading today. A
lot of bearishness has been factored into this market and the action
yesterday may make traders holding short positions a bit nervous.
Traders may be more aggressive buyers today as they might limit some
exposure before the weekend and the holiday shortened week next week.
However, significantly lower pork cut-outs might keep a lid on price
potential.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle futures continue to hold strong even though prices have rallied substantially and the Cattle-on-Feed report will be released today. | 1) | Analysts are expecting placements to be up significantly. One news reporting service indicates an average increase of 11.4% while another reports and increase of 12.2%. Either one would be negative to the market for deferred contracts. |
| 2) | The choppiness of the market in a sideways range of the past 1 1/2 weeks has alleviated the overbought technical status. This could support another leg up of price. | 2) | Feeder cattle futures seem to be tipping over and heading lower. Live cattle may not be far behind and the report today could be the trigger. |
| 3) | Hogs have no more chart gaps underneath and the price bounce yesterday may indicate the selling pressure has abated. Higher cash may move buyers to be aggressive. | 3) | The inability of hogs to hold strength today may indicate the market is not yet ready to move higher. |
| 4) | Beijing calling for a meeting with U.S. trade representatives earlier this morning may indicate an increasing desire to resolve some of the trade issues. If something was be signed, futures would rally substantially. | 4) | The large decline of pork cut-outs yesterday indicates the market needs to move more product and lower prices may be needed to accomplish the task. |
 |
| #completeherdhealth |
No comments:
Post a Comment