Cattle buyers move into midweek following aggressive futures gains, which developed Tuesday afternoon. This could lead to the expectation that additional packer interest could slowly step back into the market through the morning Wednesday, but more than likely it will be another slow affair that will allow trade to develop through the end of the week. The strong futures rally Tuesday will likely allow for a combination of follow-through buyer support as a combination of commercial support moves back into the market while traders also try to take advantage of positioning opportunities midweek. Traders will also closely watch the volume and price direction of the Fed Cattle Exchange auction through the morning for further direction of market development.
With active buyer support quickly moving back into the lean hog futures trade, lean hog futures surged back above $60 per cwt. This helped to account for triple-digit gains in front-month October futures Tuesday. This is being used as a springboard for both futures traders and cash market activity early Wednesday morning as they enter the market based on fundamental and technical support to potentially build on the recent market gains, which have developed over the last couple of trading sessions. It is uncertain just how deep buyer support will develop through the session Wednesday morning as trade volume is likely to remain sluggish through much of the morning.
| BULL SIDE | BEAR SIDE | ||
| 1) | Nearby live cattle futures broke through short-term resistance levels with October futures trading at $113.70 per cwt at the highest level since August. This has the opportunity to draw additional commercial and investment buyer support back into the complex over the near future. | 1) | Lack of packer interest through the first two days of the week is creating limited interest. This may cause cash cattle trade to be undeveloped until late in the week once again despite the fact that packers remain short bought. |
| 2) | Firm cash support last week is helping to draw buyer support into the market and create greater expectations of increased higher cash spending before the end of the week. Asking prices are starting to increase due the elevated futures prices as well as boosting beef values over the last two days. | 2) | Building supplies continue to be the focus across the cattle market through early 2018. This has not yet been a price deterrent to price levels, although at some point, traders continue to remain cautious given the fact that it remains a concern to all market watchers. |
| 3) | Aggressive gains quickly developed based on triple-digit support in rib values Tuesday which rallied $3.30 per cwt to $118.75 per cwt. This pushed total carcass values to $73.71 per cwt following a $0.17 per cwt rally. This continued market support is expected to draw traders back to the complex. | 3) | The significant discount in nearby lean hog futures continues to cause major concerns to lean hog futures as traders focus on the inability to bring additional buyer activity to nearby futures despite growing cash market support. |
| 4) | Strong nearby contracts buying activity is expected to still develop in spot October month futures over the near future. The firmness expected in cash market trade is likely to draw additional buyers to the trade in the near future. | 4) | Open interest in lean hog futures continues to quickly erode due to lackluster trade activity. There is still some increased market support stepping into December and February contracts, but the lack of overall movement in the complex, may limit the long-term moves through the complex through the middle of the month. |
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