Tuesday morning activity in the cash cattle market is expected to remain sluggish with little interest likely as bids and asking prices remain undeveloped and will likely stay that way through most of the day. The strong buyer support seen Monday will likely help to spark increased commercial buyer interest with follow-through interest stepping into the market. Traders focusing on testing contract highs in feeder cattle contracts and moving to new contract highs in front-month live cattle contracts could bring a combination of follow-through buying and selling activity in the market.
Cash hog markets continue to remain strong, following the continued fundamental market shift higher the last couple of weeks. This is likely to help draw buyer support into both cash and futures trade through the week. The strong pullback in futures trade on Monday is not expected to create a significant long-term shift in fundamental pressure as increased buyer support steps into the market through the summer.
| BULL SIDE | BEAR SIDE | ||
| 1) | Front-month live cattle futures have moved to new contract highs, which have allowed strong buyer support to rekindle the flames, sparking additional buyer support through the entire market. Additional long-term support is likely through the next couple of trading sessions based on the recent buyer activity. | 1) | Despite aggressive commercial buyer support in front-month June contracts, the significant discount seen across live cattle futures remains significant. This creates concern that long-term continued market buyer activity may quickly dissipate through the next couple months. |
| 2) | The continued strong support in buyer interest has helped to bring additional trade to cash markets over the last week. Even though bids and asking prices remain undeveloped at this point, the expectation is that higher cash trade will develop based on the push higher in futures trade. | 2) | Heavy, long positions continue to hold across cattle futures markets, creating even more uncertainty leading into the month of June. Although at this point, the latest market rally has temporarily alleviated the latest concern, the potential for a major liquidation continues to loom. |
| 3) | Cash hog prices continue to move higher as packers remain aggressive through early June. Strong procurement levels as well as the expectation of increased support through the futures complex is helping to drive buyer support into the market. | 3) | Aggressive early-week losses Monday, which posted triple-digit pressure in most nearby contracts, quickly pulled nearby contracts back from contract highs. This could allow traders to focus on additional market pressure during the next couple of weeks, changing the recent market trend. |
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Interest in pork cutout values remains strong, with additional buyer activity moving into the market. This may continue to drive buyer support back into both futures and cash markets over the near future.
| 4) | Strong consumer buyer demand has been able to keep up with supplies. But the expectations that overall growing production in the pipeline in order to feed the pork plants coming on line this summer continues to raise long-term concerns surrounding the ability to consistently move pork product in a timely fashion without sacrificing price. |
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