GENERAL COMMENTS:
It was a strong end to an exceptional week for live cattle. Nearby contracts closed higher Friday, but traders did not support deferred contracts. Traders may be hesitant to support later contracts as high prices could cure high prices and they certainly are high historically. Cash cattle trade Friday was quiet, leaving the idea that packers did not purchase cattle ahead and are just keeping up with demand. This may leave feedlots holding for higher prices in the anticipation that packers will need cattle and will bid higher to get them. Strong cash last week and increasing boxed beef continue to provide support. Boxed beef Friday showed choice up $1.15 and select up $3.38. Traders were hesitant in feeder cattle Friday, deciding to liquidate positions ahead of the weekend at these lofty price levels. The Commitments of Traders report showed fund traders adding 4,884 long futures contracts in live cattle, increasing their net-long position to 138,762 contracts. There were 801 futures contracts added in feeder cattle, bringing their net-long positions to 18,322.
Strong buying interest was uncovered in the hog market with triple-digit gains throughout 2025 contracts. The February contract was not shy about taking over as the lead month. Higher pork cutouts renewed the idea that demand is strong and will remain strong. Pork cutouts gained $2.30 on Friday, offsetting the slight $0.09 decline in the cash market. The idea that hog numbers are not quite as plentiful as had been reported and anticipated continues to provide traders the confidence to buy and hold for the long haul. The recent price weakness may be viewed as a buying opportunity. Packers may step in aggressively early this week to procure the hogs they need and may purchase for this week and a good amount for the following week. The Commitments of Traders report showed fund traders reducing their net-long position by 2,634 contracts to a total long position of 136,006.
| BULL SIDE | BEAR SIDE | ||
| 1) | Higher cash cattle and the likelihood that packers had not purchased cattle ahead will provide feedlots the confidence to hold for higher prices. |
1) | Feeder cattle were not as strong as live cattle recently as the wide spread continues to correct. Further correction of the spread is expected. |
| 2) | The strong boxed beef prices indicate demand remains strong. The packers need to maintain the current slaughter pace to satisfy demand. |
2) | December live cattle hold a premium to cash and may see choppy trading until this week's cash trade provides direction. |
| 3) | The hog market seems balanced with pork supplies not overwhelming the market as anticipated earlier in the year. |
3) | Hog traders will need to see further support for cash and cutouts for futures to regain the uptrend or further weakness may be seen. |
| 4) | Packers should be more aggressive this week as they purchase hogs in advance of the Christmas holiday week. They may bid higher Monday to purchase supply sooner rather than later. |
4) | The Commitments of Traders report showed the funds reducing their record-long positions. Further liquidation ahead of the end of the year may take place to close out their books. |
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