There was limited price movement in cattle futures Friday ahead of the Cattle on Feed report. The trade had already adjusted to the lower cash, leaving traders positioning themselves ahead of the report. Cash cattle traded $4.00 lower in the South and $5.00 lower in the North. The Cattle on Feed report was neutral to slightly bullish and could provide some support to the market Monday. However, much of it may be factored in already, leaving most of the market direction to boxed beef prices and the expectation for cash trade. Boxed beef was lower Friday, which may limit upside potential. Choice was down $1.86 with select down $0.62. The continued weakness may set the stage for lower cash cattle this week. Feedlots have lost their bargaining power and are selling rather than holding over and potentially receiving yet lower prices. The Commitments of Traders report showed funds reducing their long position in live cattle by 8,766 contracts to a net-long of 127,603. They added 1,501 long futures positions to feeder cattle, bringing their net-long to 28,657 contracts.
Nearby hog contracts closed under pressure with weekly export sales not as good as hoped and the negative cutout prices of the week weighing on the market. However, cutouts rebounded nicely Friday, posting a gain of $3.04. This may turn the tide to begin the week. Futurse may have finished the substantial correcting with the potential for traders to buy back into the market. The National Daily Direct Afternoon Hog report showed cash up $0.64 as buyers remained active. The combination of higher cutouts and stronger cash Friday should provide support to begin the week. The Commitments of Traders report showed fund traders adding 9,357 long positions to lean hogs, increasing their position to a net-long 11,745 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | The Cattle on Feed report showed placements below the average trade estimate, which may support the market. |
1) | Cattle marketings were lower than the trade estimate, which may keep the reaction to the Cattle on Feed report neutral. |
| 2) | Weekly beef export sales were good at 21,500 metric tons (mt) and 64% higher than the previous week. International demand remains strong. |
2) | Boxed beef prices continue to slide and will keep pressure on the cash market. |
| 3) | Pork cutouts were up significantly Friday, indicating demand remains strong. Further gains may be seen Monday. |
3) | The packers may not need to purchase hogs aggressively to begin the week. They bought a good amount on Friday at higher prices. |
| 4) | The packers seem to be short-bought in hogs. If this is the case, they may be aggressive in the cash market Monday, |
4) | The liquidation phase seems to have subsided. However, it may be difficult to regain the losses anytime soon. Traders will be cautious over ongoing demand. |
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