GENERAL COMMENTS:
Feeder cattle futures remained on fire with another day of triple-digit gains and January showing the greatest strength, increasing by $2.62. The spread between live and feeder cattle has widened substantially over the past two weeks. Live cattle have shown little price movement this week, even though the discovery of screwworm in Mexico prompted the restriction of cattle imports from the country. Feedlots have not found support for higher cash prices based on futures. However, boxed beef has been showing strong gains, which may make packers more aggressive. Consumer demand seems to be increasing, moving into the holiday period. Boxed beef prices on Tuesday were higher with choice up $1.86 and select up $1.75.
Hog futures continued to push higher Tuesday with new contract highs in February through October contracts. The June and July contracts reached $101 and held into the close. It has been some time since hog futures have reached this level. Cutouts have not supported the strength, as they declined $2.18 Tuesday. The strength is the perception that higher prices will be achieved and demand will improve. Hog numbers are tighter than anticipated earlier in the year, prompting traders to buy and hold. Price declines have been viewed as buying opportunities. The price change was not released on the National Daily Direct Afternoon Hog report with the weighted average price posted at $87.86. The markets will be closed Thursday for the Thanksgiving holiday but will reopen Friday morning at the regular time.
| BULL SIDE | BEAR SIDE | ||
| 1) | January feeder cattle closed above technical resistance from July 18, which may increase buying interest. |
1) | Live cattle futures have not found strength from the restriction of cattle imports from Mexico. This may not support higher cash cattle prices this week. |
| 2) | Boxed beef prices seem to have turned the corner as demand has improved, increasing prices. |
2) | Feeder cattle have moved quickly into an overbought position. This may trigger some profit-taking ahead of the Thanksgiving holiday. |
| 3) | Hog futures continue to find strong support, pushing contracts to new highs. Traders continue to buy the strength, trading the trend. |
3) | The weakness of pork cutouts may limit further upside potential for hog futures in the near term. |
| 4) | The Thanksgiving holiday means one less day of buying hogs this week. This may have the packers more aggressive Wednesday to compensate. |
4) | Hog futures will not continue to make new contract highs indefinitely and some selling could be seen Wednesday ahead of the Thanksgiving holiday. |
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