Lackluster market activity is expected early Monday morning in both cash and futures trade across the cattle complex with traders looking for additional direction from several market areas early in the week. The active trade late last week in cash cattle markets, which helped to solidify cash cattle prices at $111 on a live basis and $175 dressed basis, will put the focus back on showlist distribution and inventory taking. It is likely that active bids may not develop until sometime Tuesday or Wednesday given the amount of cattle traded over the last week and the general tone of the market. Futures are expected to start out mixed with a positive tone given the recent underlying support redeveloping in feeder cattle trade. This will keep most traders on the sidelines through the first couple hours as volume will remain light during initial trade.
Early-week activity in the lean hog market is expected to be mixed to firm in futures trade with follow-through buyer support likely to develop while a light to moderate pullback is expected in deferred contracts as traders focus on the lack of certainty in outside markets. Cash hog prices are expected to remain steady to $1.50 per cwt higher with most bids 50 cents to $1 per cwt higher early Monday. Aggressive hog movement is likely to be the main focus once again as packers continue to focus on moving market-ready hogs through the expanded system with an expected daily slaughter of 460,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Moderate-to-active cash cattle trade through the end of last week continues to put the emphasis on increased overall market support on underlying price firmness in cattle values through the fourth quarter of the year. This is creating firmer expectations by feedlot managers, as they are likely to continue to aggressively price cattle early in the week. | 1) | Given the active cash trade seen last week, packers are expected to remain well positioned early in the week. This will likely limit overall market activity and likely put more leverage in the hands of packers through most of the week to hold prices steady to lower. |
| 2) | Live cattle futures have remained generally resilient over the last month as strong buyer support has continued to move into the complex, allowing futures to move back into the top end of the short-term price range. This is creating some additional momentum, which is helping to draw additional commercial buyer activity and add open interest to the market. | 2) | Strong price pressure developed late last week in feeder cattle futures with markets eroding $2 to $3 per cwt. This could draw additional underlying pressure into all cattle futures during the next couple of trading sessions. |
| 3) | Strong packer margins continue across the hog complex through the middle of October, even with the increased support in cash values developing over the last couple of weeks, margins have continued to be impressive not only for this time of year, but for any point of processing levels through the season. | 3) | Lean hog futures are expected to trade within a narrow trading range early Monday with little buyer support quickly moving back into the complex. The overall lack of direction through the market may quickly limit support through the remainder of the month of October. |
| 4) | With October futures now expiring, December contracts are now the official spot month contract in lean hog futures. Prices have rallied almost $6 per cwt over the last month, allowing active buyer support to flood back into the complex through the month of October, with increased underlying support coming from both fundamental and technical support. | 4) | Pork values have had a hard time showing consistent support over the last several days. This may limit additional buyer support early in the week, even though strong demand continues to be reported with aggressive pork product available to the market. The challenge to aggressively move this product at higher prices continues to be a tricky situation. |
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