GENERAL COMMENTS:
December live cattle closed at the highest level since July 31 Tuesday and a new high for this move. Traders are feeling a little more confident over cash prices this week as further support was seen in boxed beef. Choice cuts increased by $2.09 with select cuts up $0.77. This moved choice back above $300 again. It is too early to tell, but cutouts may begin to trend higher. This, along with stronger futures, will provide the confidence needed for feedlots to hold out for higher prices. That seems a strong possibility as the packers do not have many cattle purchased ahead. Cash trade is not expected Wednesday as solid offers have not yet been established. Feeder cattle traders are not quite as optimistic, remaining less enthusiastic so far this week.
Hog futures showed strong buying interest Tuesday as market fundamentals this week have provided support. Cash was again higher with the National Direct Afternoon Hog report up $1.11 and cutouts up $0.47. Futures have regained the losses of the past three days, possibly renewing the uptrend. Packers may be aggressive Wednesday as they would like to purchase much of what they need by midweek, eliminating the need to be aggressive later in the week. The strong slaughter pace continues and the packers need to maintain supply.
| BULL SIDE | BEAR SIDE | ||
| 1) | Stronger cattle futures may increase the resolve of feedlots to hold for higher cash. It worked last week. |
1) | Feeder cattle futures may be an anchor on the market, limiting upside potential for live cattle contracts. |
| 2) | Boxed beef prices may be gaining some strength as demand may be improving. Packers will need to maintain or increase slaughter speeds. |
2) | Live cattle futures are overbought, increasing the potential for a price retracement. |
| 3) | Hog futures have regained much of their losses, potentially resuming the uptrend. Traders are not anxious to liquidate long positions. |
3) | Hog futures will need to see further gains in cash and cutouts to maintain buying interest from traders. |
| 4) | Packers may not have purchased enough hogs on the cash market and will remain aggressive Wednesday. |
4) | Once packers are finished buying for the week, futures may settle back as underlying support may be taken out and technical traders will sell the market quickly to take profits, and sell stops are triggered |
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