GENERAL COMMENTS:
Commodities had a big day Tuesday, with livestock and grains both seeming to find a lot of buying interest. Traders believe the rally is due purely to money flow, as there was no fundamental reason for live cattle to be $4 to $5 higher, feeders to climb $7 to $9, and corn to also be up over 10 cents. Daily slaughter levels continue to be strong as the threat of ICE raids subsides. Mexican feeder crossings are at 25,450 head through Oct. 5.
Hogs had a bit of a setback on the nearby futures contracts Tuesday despite most other commodities rallying. Pork cut-out values fell $2.17, with the deepest price cuts found in Picnic cuts, falling $9.05 per 100 pounds. Slaughter numbers are strong, with slight gains versus last week and already 16,000 head more than a year ago this week.
| BULL SIDE | BEAR SIDE | ||
| 1) | An influx of money into the agricultural sector brings hope for continued buying. | 1) | Higher slaughter gives packers more cattle to work with and can reduce their urgency to bid aggressively. |
| 2) | Tax relief from red-dye diesel fuel losing on-road restrictions until the end of the year brings relief to wallets as cattle producers stretch budgets with growing feed costs and gives confidence for continued buying. | 2) | Between live cattle now crossing the border from Mexico and beef being imported, the administration is doing what it can to lower beef prices. |
| 3) | The funds are holding a record short position in hog futures. Any supportive fundamental news could trigger significant short covering. | 3) | Recent hog strength in futures lacks fundamental news to continue much higher. |
| 4) | Mexico has been an important source of demand for U.S. pork, giving some fundamental support to futures. | 4) | Pork cutout values are weaker, Hog prices on the Daily Direct Afternoon Hog Report are down, and the CME Index is also lower, giving a lot of indication that the futures rally may be hitting headwinds. |
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