GENERAL COMMENTS:
The expectation was for cash to trade on Wednesday but that failed to surface. This gives the impression that the packers may not be short-bought as anticipated. Cash trade should surface today unless the packers can afford to hold out due to the upcoming holidays and the reduction of slaughter. It would then be up to feedlots if they want to or can afford to hold out. Live cattle futures have eliminated the technical breakout last week and are back below resistance. The Cattle on Feed report may limit the aggressiveness of traders unless cash cattle trade higher before the report. The average estimates for the Cattle on Feed report are for on feed as of December 1st at 99.9% of a year ago. Placements in November at 95.9% and marketed in November at 98.2%. Boxed beef prices were lower with choice down $0.79 and select down $2.95. Feeder cattle showed lackluster trade following the lead of live cattle. Futures remain in a range.
Hog futures were able to hold gains through the August contract. The June and July contracts were able to hold above $100 after dipping below that level last week. The trade had anticipated cash hogs would not see much strength this week but the packers were more aggressive on Wednesday with the National Direct Afternoon Hog report showing cash up $0.24. The slaughter pace remains strong and hogs are needed to maintain the chain speed and satisfy demand. Pork cutouts gained $1.58 on Wednesday. The weekly hog weights increased by 0.4 pounds to an average of 289.5 pounds. This was 0.2 pounds lower than a year ago.
| BULL SIDE | BEAR SIDE | ||
| 1) | Some bids were posted in Nebraska at steady prices with last week but feedlots did not budge as they looked for higher prices. The packers may need to raise bids to purchase cattle. | 1) | Live cattle futures have fallen back below support after the breakout last week. Traders may be reluctant to be aggressive in the market ahead of the Cattle on Feed report. |
| 2) | Cattle futures should remain supported ahead of the Cattle on Feed report as consumer demand remains strong and cattle are needed to meet that demand. |
2) | If cash cattle trade is no better than steady money, further liquidation may surface as traders reduce their long positions. |
| 3) | Hog futures seem to have established a sideways trading pattern which may hold through the end of the year. |
3) | Hog futures have struggled recently. The head and shoulder technical formation may keep traders cautious. |
| 4) | Weekly hog weights remained close to the previous week and a year ago. Hogs are not backing up in the country as continued strong slaughter should support prices. |
4) | Pork demand is good but not exceptional. This may limit the upside price potential through the end of the year. |
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