Light trade developed in the North during feedlot trade Thursday afternoon at $220 per cwt dressed basis which is $4 higher. It is expected that additional trade is expected to need to develop in all areas through the end of the week. Bids may not develop right away in the morning, but through the morning Friday packers may show moderate to strong interest. The direction of futures trade and outside markets could have a lot to do with how aggressive end-of-week buying activity is from the packer end early in the day. But feeders seem to be pretty set on strong asking prices as they look for higher money by the end of the week. Look for mixed futures with a combination of spillover support from the cash market moves while the building pressure in feeder cattle markets are adding some concerns into the overall marketplace.
Futures trade is expected to remain supportive once again following strong upward market gains of $1.12 per cwt in July contracts. This helped to draw additional firm support into all nearby contracts. Strong support developed across both cash and pork values through the day Thursday, leaving the expectation for increased cash market support once again Friday morning. Traders are looking for additional market trade to move back into the market even though procurement numbers are expected to be lighter at the end of the week. Total Friday runs are expected to be around 418,000 head with cash bids expected to be firm to $1 per cwt higher in most areas.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Strong cash buying activity is expected to continue to develop through the end of the week, following the light trade which started to trickle into the market Thursday. Even though activity remained light, the ability to sell cattle $4 per cwt higher in the North has helped to crack the ability of weaker market cash markets and allowed for feeders to become more aggressive at the end of the week.
| 1) | Continued pressure in feeder cattle contracts remains a growing concern through the market as traders focus on the inability to draw or keep buyers back into the complex. This may limit long-term support not only to the feeder cattle trade, but this softness will likely eventually bleed into live cattle trade, leading to long term liquidation. |
| 2) | Live cattle futures continue to hold onto firm buyer support despite continued attempts to push lower in the feeder cattle market over the last couple of days. There remains strong commercial buyer support that is holding the June live cattle futures above the $131 per cwt price level and August futures trade at $124 per cwt. This could help maintain long term buyer support through early summer trade. | 2) | The light cash market activity and the delayed Fed Cattle Exchange Auction market created even lighter numbers with 1,394 head offered and 334 head actually sold. All of this confusion surrounding the market is adding more concern to the cash market situation and could limit the overall support of the market through the next couple of weeks. |
| 3) |
Continued technical support continues to remain firm across the complex with traders focusing on long term market support. This has pushed summer contracts back above $82 per cwt with the potential to move markets to contract highs for the week.
| 3) | Despite the strong overall move higher in pork carcass values Thursday, the sharp triple-digit losses in butt and rib values during early summer dates is a bit concerning as this is a product that is starting to be the focus on through this time of year. This could be a challenge if these price trends continues. |
| 4) | Extremely strong support in pork values has helped to create additional market optimism through the entire lean hog futures complex as traders focus on the ability to not only move additional product through the live market but demand for pork product remains strong during early summer. | 4) | Continued buyer support is still stepping into the futures market, but overall support into nearby summer contracts is starting to slow. This may limit the overall ability for buyers to move prices much above the current price levels over the next couple of weeks as traders look for longer term support. |
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