GENERAL COMMENTS:
Demand remains strong with boxed beef prices increasing significantly after Christmas. Choice jumped $4.41 with select up $2.20. Some cattle traded in Kansas and Texas at $190 likely setting the stage for steady to higher cash on Friday. The packers will be reluctant but will need to pay more to obtain the cattle they need even for the holiday-shortened week. Feeder cattle led the charge with contracts nearing recent highs. Current demand and current supplies should support the market for the foreseeable future. Fund traders may add more long positions on the idea demand will remain strong. High beef prices do not seem to be having much impact on demand. Prices will need to increase further before demand may slow. There has been no indication when the border may open for cattle from Mexico to move into the U.S. again.
Hog futures struggled much of the day but found some strength as cutouts were higher due to good demand. Pork cutouts gained $1.07 with most categories showing higher prices. The National Daily Direct Afternoon Hog report showed cash down $0.48 with the packers holding back on bids. With the shorter upcoming holiday week, the packers may be more aggressive today as they will purchase sufficient hogs to position themselves with supply for next week. The upside price potential may be limited unless demand increases early next year.
| BULL SIDE | BEAR SIDE | ||
| 1) | The large increase in cattle futures reversed the downtrend that had developed. The funds are defending their long positions as they remain bullish on the market. | 1) | Feeder cattle futures are close to strong technical price resistance which traders may see as a level to liquidate. |
| 2) | Steady to higher prices for cash cattle this week indicates demand is strong and the packers need to remain aggressive with purchases. Feedlots see this and will hold for higher prices. | 2) | Exports may remain slow due to the high beef prices. This and heavy cattle weights should keep the beef supply sufficient and limit upside potential. |
| 3) | Hog futures have established a sideways pattern and seem to maintain and build support. This may provide traders with confidence to establish long positions. | 3) | Weekly hog weights increased by 0.2 pounds averaging 289.7 pounds. This is 0.4 pounds above a year ago. |
| 4) | Demand is holding and hog slaughter should remain at a strong pace. High beef prices may result in greater demand for pork. | 4) | The packers will need fewer hogs as next week is another holiday-shortened week. They may not be aggressive in the cash market. |
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