Cattle futures were supported last week by the potential for higher cash cattle trade. Traders were rewarded for their assessment by substantially higher cash prices. Southern live cattle traded $7.00 higher with Northern dressed cattle trading as much as $16.00 higher. The strong price rally seen over the past two weeks may have run its course, as lower boxed beef prices and the announcement on Saturday that President Trump has ordered his administration to examine price-fixing and the impact of foreign ownership in the food supply chain. The last time he talked about looking into the activities in the beef industry, the market fell. Even though the beef industry was not mentioned directly this time, it may have a similar impact. Cash cattle jumped higher last week, but further weakness in boxed beef may limit further upside potential. Choice boxed beef declined $1.32, with select down $2.93, adding to an already negative week for boxed beef prices.
Hog futures showed further strength with contracts moving through and closing above technical resistance. That certainly provided support through the end of the week and may result in follow-through buying Monday. Cash was lower on Friday, with the National Daily Direct Afternoon Hog report down $1.12. However, this was more than offset by pork cutouts jumping $3.06. All categories of cutouts were higher, with butts and picnics showing gains of $5.18 and $5.05, respectively. The Head and Shoulders pattern remains intact, which could mean further upside price gains may develop.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong cash cattle is an indication of the tight market fundamentals and continued good demand. |
1) | President Trump is setting up a task force to look into price-fixing and the impact of foreign ownership in the food system. This may trigger a knee-jerk bearish reaction in the cattle market. |
| 2) | Feedlots will not be anxious to sell this week due to packers being short-bought last week and likely not having purchased many for deferred delivery. |
2) | Boxed beef prices continue to show weakness and could put pressure on cattle futures. |
| 3) | The Head and Shoulders bottom formation indicates that further upside for futures is possible as technical traders remain interested in buying into the market. |
3) | Hogs have had more technical support than they have had fundamental support. This may limit upside price potential. |
4) |
Pork cutouts may find overall support through December as demand is expected to improve. |
4) | Packers may not be aggressive Monday as they wait to see the level of pork movement through the weekend. |
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