By Dennis Smith
Live cattle futures closed lower across the board yesterday but the action, technically, was not significant. Cattle futures are in the process of forming a major bottom and eventually will move sharply higher, in my opinion. The upward move will likely be driven (led) by the feeder cattle market. There has not been any cash steer trade yet this week with bids surfacing in the south at $1.17. The choice beef cutout was quoted up .37 yesterday at 186.78. I noticed two things in the closing beef report. First, the choice gained on the select and offers of beef were described as light to moderate. My evening livestock wire had four bullish strategies to consider.
Cash hog prices yesterday; mostly down 50 cents, were actually stronger than generally expected by the trade. The cash outlook for today is steady to down 1.00. We'll see. Tight supplies will likely prevent a sharp drop in the cash bids for at least another couple of weeks and possibly during the entire month of August. The pork cutout was up 1.24 yesterday, quoted at 101.24. The latest CME lean hog index stands at 100.98. Thus, it's easy to see there is not much margin in processing hogs. When packers are operating on slim margins, it's usually a function of tight supplies. Lean hog futures sold off hard yesterday and open interest declined by over 4,500 cars. It appears that holders of long positions sort of threw in the towel and gave up. I'm bullish in the near term, bullish toward the Aug contract which is about 500 points under the cash. We've been accumulating call options. Look for a higher open and a higher close today.
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