GENERAL COMMENTS:
It was an interesting day for the cattle as early strength gave way to weakness. Traders did not wait for cash but decided to liquidate positions taking advantage of the new contract highs to bank some profits and prepare for the Cattle on Feed and Cattle Inventory reports today. However, with cash trade yesterday at $2.00 higher in the South and $3.50 higher for Northern dressed cattle, traders may buy back into the market today. Even with some higher cash trade yesterday, feedlots are holding for more with current offers higher. The market continues to be stretched with tight cattle supplies resulting in higher cash while at the same time demand has slowed. Boxed beef again was lower with choice down $1.03 and select down $1.25. Export sales continue to hold well with sales yesterday of 20,900 mt for the week which was up from the previous week. The Cattle on Feed report will be released after the close. Estimates are for July 1 on-feed to be 97.6% with a range of 97.0%-98.9%. Placements in June are estimated at 98.1% with a range of 96.2%-102.7%. Marketings in June is estimated at 95.5% with a range of 95.0%-96.0%. The Cattle Inventory report will also be released.
Hogs had an impressive day with contracts through February posting triple-digit gains. Front-month August so wanted to narrow the gap to cash that it left a gap in the chart on the opening. Demand remains strong with cutouts up $2.49 yesterday. Cash was slightly lower as expected with the National Direct Afternoon Hog report showing a decline of $0.19. Cash is expected to be lower again today as packers have most of the purchasing for the week completed. Exports sales were not supportive to the market yesterday as the volume was down 22% from the previous week at 19,200 mt.
| BULL SIDE | BEAR SIDE | ||
| 1) | Higher cash trade yesterday with feedlots still asking for more should provide support to futures. | 1) | The reversal of cattle futures yesterday may indicate a further correction may be possible ahead of the reports today despite what underlying cash does. |
| 2) | The Cattle on Feed report and Inventory reports should show continued tighter numbers which should provide continued support under the market. | 2) | The uncertainty of the reports generally has traders positioning themselves to minimize exposure if there are unexpected numbers released. |
| 3) | Steadily increasing cutouts indicate strong demand requiring packers to be more aggressive with hog purchases resulting in higher cash prices. | 3) | The gap left in August hogs yesterday may be filled at some point during the next three weeks. |
| 4) | The discount of about $20.00 on the October futures carry to cash will narrow providing support for the contract. | 4) | Slower export demand may put pressure on prices as more pork remains available to the domestic market. |
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