GENERAL COMMENTS:
Live cattle futures have held strong this week as traders anticipate higher cash trade. Packers have some cattle purchased, but it is doubtful they would be able to end another week with only limited purchases. There have not been solid bids or offers posted as we are moving into the second half of the week. Packers have been slowing slaughter in an effort to reduce the purchases they need to make and improve margins. However, even with that, boxed beef continues to struggle with choice down $1.09 and select down $0.65. The cattle reports will not take place until after the close of futures trading on Friday so there will be no influence coming from them until Monday. Weekly export sales today are not likely to have much influence but are more mainly just information. Estimates for the Cattle on Feed report 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%.
August hog futures continued to move higher as it narrowed the discount it holds to cash. However, later contracts continue to struggle with traders uncertain over the full implementation of Prop 12 and Question 3 and the impact on demand it may have. This makes spread trading attractive. Slaughter remains active running more than last week and a year ago. Packers remained somewhat aggressive yesterday with the National Daily Direct Hog report showing a gain of $0.23. They are likely to step back the rest of the week. Cutouts were slightly weaker with a loss of $0.07. Saturday slaughter is estimated at 31,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Feedlots seem determined to hold for higher cash even if they need to hold cattle over another week. | 1) | The Cattle on Feed report always creates uncertainty with the potential for surprises. Traders may take some profits ahead of the report. |
| 2) | New contract highs in live cattle continue to provide confidence for traders to buy into the market. Strong fundamental support keeps the market bullish. | 2) | Cattle futures are overbought and ready for correction. Prices cannot move higher indefinitely. |
| 3) | August hogs hold a discount to cash and the index which will need to be eliminated over the next three weeks as they will need to converge. | 3) | Differed hog futures continue to slowly erode as traders remain uncertain over demand. |
| 4) | Good demand for pork keeps packers active and cash prices trending higher with increased slaughter requiring more hogs. | 4) | Hog weights increased 0.1 pounds last week to an average of 277.9 pounds. This is 0.4 pounds higher than a year ago. |
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