Overall interest through the cash cattle market is expected to remain quiet once again early Tuesday morning with potential bids developing later in the day, although it is unexpected that trade will be seen until late in the week. Continued pressure in futures trade is expected to develop as traders remain focused on the potential of increasing supply levels in the upcoming Cattle on Feed report. Following the pressure in cash cattle trade over the last couple of weeks, follow-through pressure is likely to develop in cash markets, although feeders will attempt to limit losses as asking prices become more established through the day Tuesday.
Follow-through pressure is expected in cash and futures trade early Tuesday morning following a combination of firm market pressure on Monday and the end of last week. Triple-digit losses Monday will create underlying tension as traders try to defend short-term support levels of $64.40 per cwt in front-month futures. The inability to hold this line through early trade will create the potential for strong additional liquidation through the entire complex. Cash hog values are expected to remain weak with bids expected to emerge steady to $2 per cwt lower although most bids are likely to remain steady to $1 lower. Slaughter numbers early Tuesday are pegged at 440,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Continued strong beef exports and active domestic demand through the month of August is helping to move the growing supply levels of beef available to the market. Continued focus on the ability to grow and sustain export demand continues to limit the losses in the near term. | 1) | Traders continue to focus on the upcoming Cattle on Feed report being released Friday afternoon. The expectation is that overall feeder cattle placements in the month of July will have grown an additional 8% to 10%, which will put even more attention on the growing supply of cattle available through the coming months. |
| 2) | Upcoming Labor Day beef demand may draw some additional buyer support back into the complex over the next couple of weeks. Traditionally, Labor Day demand has been a strong movement of beef products and the last big push of the summer in terms of meat movement in the domestic market. This may bring some needed stability to the complex. | 2) | Nearby live cattle futures continue to erode through mid-August. This is allowing markets to break through summer support with prices now testing support seen during the spring. Overall market support remains unavailable as prices have moved in a choppy pattern, with limited support based on growing supplies. |
| 3) | Firming pork cutout values early in the week are once again indicating that even though overall pressure is developing in cash and futures trade, the ability to move additional amounts of pork at higher prices has continued to drive buyer activity through late summer. | 3) | Triple-digit losses seen over the last couple of trading sessions is testing short-term support levels in nearby lean hog futures. This remains the focus early Tuesday morning, as a break through $64.40 per cwt from the current price level of $64.67 in front-month October contracts would likely draw additional strong market pressure back into the complex. |
| 4) | Continued active plant speed through the middle of August has allowed for additional pork to continue to move through the system in order to attempt to keep up with the growing level of hogs available to packers. Not only are packers focusing on active daily moves, but projected Saturday runs are expected near 130,000 head. | 4) | Cash hog values continue to remain under pressure with overall softness developing in both national and Iowa/Minnesota markets through the week. |
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