GENERAL COMMENTS:
Live cattle traders played a tug-of-war on Tuesday, with the end result being futures showed little change. Feeder cattle showed significant volatility and posted triple-digit gains. With boxed beef prices stronger this week, traders think cash prices may turn out better than previously thought. Packers seem to show a willingness to obtain some cattle at least at steady money, if not higher, as they have already tipped their hand with early bids. Usually, they wait until later in the week. Boxed beef prices jumped on Tuesday, with choice up $2.18 and select up $6.25. Feedlots may gain the confidence to hold for more money this week due to stronger beef prices.
Hog futures found strength likely from short-covering after four days of weakness. Support held in the October and December contracts while later contracts initially made new lows before reversing to trade higher. The strength was not fundamentally driven, as cash and cutouts remain unable to find solid support. Packers were aggressive with their hog purchases on Tuesday; unfortunately, the National Daily Direct Afternoon Hog report showed a decline of $0.48. Pork cutouts slipped $0.03. Packers have no difficulty finding sufficient hogs to maintain the higher slaughter pace. Hog weights continue to increase with a gain of 1 pound to an average of 286.9 pounds.
| BULL SIDE | BEAR SIDE | ||
| 1) | Packers seem to be somewhat anxious to purchase cattle this week, as they already posted bids. They may be short bought. | 1) | Cattle futures have been unable to break out above technical resistance. This may limit gains and impact packer bids. |
| 2) | Even steady cash cattle this week should support futures as they hold a discount to cash. | 2) | A sharp rise in boxed beef prices may be met with consumer resistance as they continue to face higher food and fuel prices. |
| 3) | Hog futures rebounded on short-covering, which may continue Wednesday as the market follows through to the upside. | 3) | Weekly hog weights increased by one pound to average 286.9 pounds. This is just 0.1 pound below a year ago. |
| 4) | The hog slaughter pace remains strong as packers continue to process hogs to meet demand. This may eventually tighten supplies. | 4) | Pork cutouts remain unable to find solid support. Demand is good, but hog supplies are plentiful. |
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