Cattle futures posted a strong close for the week with feeder cattle leading the charge. Futures have closed at the highest level since Aug.12. Cash cattle traded higher last week, solidifying the recent strength in futures. The bearish news has been digested, with traders feeling the price weakness since July has been overdone. Cash traded higher last week, with Northern dressed cattle averaging $5.00 higher and Southern live cattle seeing bids of $226 late on Friday, with final results to be posted today. There has been no indication that any of the duty-free 300,000 metric tons of beef have been imported to date. The logistics of importing this amount over 90 days are slim, and the likelihood of it reducing beef prices is questionable. Boxed beef prices on Friday were mixed, with choice down $2.43 and select up $1.07. The Commitment of Traders report showed fund traders as net buyers of 54 live cattle contracts, increasing their net long position to 48,905 contracts. Fund traders were net sellers of 988 futures contracts, reducing their net long position to 7,448.
Hog futures took it on the chin on Friday as futures fell below support, triggering increased long liquidation. It will be critical for futures to hold at these levels, or more bullish traders will throw in the towel as support remains elusive. Cash declined $1.48 on the National Daily Direct Afternoon Hog report, and pork cutouts fell $2.01. With bearish fundamentals, traders may not buy futures because it is the beginning of a new week. Hog weights are declining, but sufficient hogs are available for packers without them having to bid higher to obtain them. The Commitment of Traders report showed that fund traders were net buyers of 5,057 futures contracts, reducing their short position to 29,634.
| BULL SIDE | BEAR SIDE | ||
| 1) | Higher cash provides strong support to the cattle market, with the potential for stronger cash again this week. | 1) | Boxed beef prices remain mixed, possibly indicating demand has slowed, and supplies are sufficient. |
| 2) | This is no indication of the status of duty-free beef imports and how much can be imported over a period of 90 days. Actual imports may fall far short of the 300,00 metric tons. | 2) | It may take more than the recent uptrend in cattle futures and stronger cash last week to turn traders into aggressive buyers. |
| 3) | Hog traders may buy the weakness on Friday in anticipation of a bounce, providing the opportunity to scalp a profit. | 3) | Hog futures are struggling due to the weakness in both cash and cutouts. |
| 4) | Lower hog weights may indicate supplies are being pulled forward. This may eventually tighten the market. | 4) | Traders have little confidence to be aggressive long-term buyers in hog futures. Demand needs to improve. |
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