GENERAL COMMENTS:
Cattle futures continued to struggle on Friday, pressured by lower cash and the weekend. Cash cattle finished the week with Southern cattle averaging $7.00 lower, with Northern dressed cattle $10.00 lower. With packers being able to purchase sufficient cattle for immediate needs and some for later needs, the prospect for steady or higher cash this week is not very good. Technically, the market is weak, and bullish traders will need to make a collective effort to turn the trend higher again. Boxed beef prices were higher, with choice up $1.87 and select up $4.84. However, this may not be sufficient to turn the trend, as demand has slowed with increased temperatures. This is seasonal and not a surprise. Feeder cattle prices are lower as buyers follow the live cattle market and are paying less for cattle. The Commitment of Traders report showed fund traders reducing their net-long live cattle position by 4,532 futures contracts to 114,908. Fund traders were net sellers of 1,041 long feeder cattle futures, reducing their long positions to 14,566.
Hog futures closed mixed ahead of the weekend, as traders remain cautious about whether fundamentals will support stronger prices this week. Both cash and cutouts were higher on Friday and may provide support for the market today. The National Daily Direct Afternoon Hog report showed cash up $1.25 on moderate volume at the end of the week. Pork cutout values were higher, posting a gain of $2.53. The higher slaughter pace continues, indicating good demand. However, it has not resulted in consistent buying interest in hog futures. The Commitment of Traders report showed the fund traders as net sellers of 1,979 contracts, increasing their short positions to 40,390 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | August live cattle futures penetrated support on Friday, but closed above it. This could generate technical buying interest. |
1) | Cattle futures made a new low on Friday, keeping the recent downtrend intact. |
| 2) | Reduced cattle supplies will limit price weakness. A market correction may be a buying opportunity. |
2) | Cattle futures have fallen below the 100-day moving average, which may keep technical pressure on futures, resulting in further liquidation as stops are triggered. |
| 3) | Pork cutouts moved to $101.34 on Friday, the first time they have been above $100 for a while. Improving demand is being reflected in retail values. |
3) | USDA lowered its price estimates for hogs on the WASDE report. Of course, that can change, but it keeps a bearish element in the market. |
| 4) | The strength of cash and cutouts on Friday should provide support today as the market may be turning more bullish. |
4) | Packers may not be aggressive to begin the week, which may limit buying interest in hog futures. |
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