GENERAL COMMENTS:
Cattle futures fell below the uptrend on Wednesday as traders liquidated some long positions, concerned about whether cash will advance this week. The packers have some cattle already purchased ahead and may not be very aggressive as boxed beef prices remain variable. Some positioning may already have taken place ahead of next week's Cattle on Feed report. In other news, the port at Santa Teresa, New Mexico, prepares to reopen for the importation of cattle from Mexico on Sept. 24. The Cattle on Feed report will be released on Friday, Sept. 18. Estimates are for cattle on feed on Sept. 1 at 101.89% of a year ago. Placements in August are at 96.8%. Cattle marketed is estimated at 96.1%. Boxed beef prices were lower on Wednesday, with choice down $0.27 and select down $1.79. Some grocery stores in Wisconsin are reportedly not accepting the foreign tariff-free beef coming in under the recent federal import initiative.
The liquidation phase ran its course Wednesday after a lower open. This does not indicate that a bottom has been reached. Market fundamentals are not supportive, as both cash and cutouts remain weak. The National Daily Direct Afternoon Hog report showed cash down $1.98 to $82.60, with a moderate movement of hogs. Pork cutout values declined $1.15. The chart gap above the market may take some time to fill given the fundamental weakness. Hog weights increased last week, averaging 285.9 pounds.
| BULL SIDE | BEAR SIDE | ||
| 1) | It remains uncertain when tariff-free beef will make it to the grocery stores and how much actually will be imported over the 90-day period. | 1) | The weakness of boxed beef prices will leave packers unwilling to increase bids for cattle as they try to protect their margins. |
| 2) | The weakness on Wednesday may have been a reaction to the resumption of imports through the port in New Mexico and traders positioning ahead of the Cattle on Feed report. | 2) | The recent uptrend in cattle futures may be in jeopardy due to contracts closing below the uptrend line. |
| 3) | The liquidation phase has run its course. Traders may be more confident to buy into the market anticipating a price retracement. | 3) | Weekly hog weights increased 2.5 pounds to average 285.9 pounds. Although weights are 0.7 pounds below a year ago, it was a large increase. |
| 4) | A chart gap remains above the market from earlier in the week that will be filled at some point. | 4) | Liquidation of hog futures may have run its course, but that does not indicate support has been found. |
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