GENERAL COMMENTS:
The market expected cattle futures to be a little more exciting than the trade actually was on Monday after a bullish Cattle on Feed report. Feeder cattle saw the biggest impact with the deferred months rallying faster than the nearby months. Traders were bear spreading futures given the lower placements. Cash trade last week was stronger for live cattle, with an average price paid more than $3 higher than the week before even with the lack of trade that took place. Packers were patient last week with only 40,128 traded versus 90,762 the week before, but they will need to step back into the market this week.
Lean hogs have struggled with lack of bullish news for the market to cling onto. Pork cutout values continue to fall as buyers have an abundance of supply available. Slaughter volumes remain high, also putting pressure on wholesale prices. The Commitment of Traders report showed managed money bought back 1,804 by Tuesday, Oct. 20. However, it is expected that funds will continue to sell additional contracts following the move lower in futures late last week.
| BULL SIDE | BEAR SIDE | ||
| 1) | Feeder cattle will have long-term support from the lowest September placements recorded in over 30 years. | 1) | There are plenty of live cattle ready to come to market in the near term and could pressure the market. |
| 2) | Beef cutouts were strongly higher on Monday's afternoon update. | 2) | November feeder cattle futures are struggling to close above the trend line and could be resistance going forward. |
| 3) | The Cold Storage report showed a slight decrease in frozen inventories from last month on Friday's report. | 3) | Weak demand weighs heavily on pork prices. |
| 4) | Low prices typically bring in new buying interest. | 4) | Higher hog inventories show long-term bearishness in an already weak market. |
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