Follow-through pressure early Monday morning is expected to redevelop as traders continue to assess the overall long-term direction of beef supplies and end-of-year demand potential. The sharp losses that redeveloped late last week in feeder cattle markets have caused traders to look for additional long-term direction and renewed buyer activity. Some short-covering could develop early in the session in both live cattle and feeder cattle markets. But the recent pressure may not be enough to establish strong support levels through the first half of the week. Cash cattle markets are expected to remain sluggish with little to no direction developing Monday as showlist distribution and inventory-taking are the main order of business.
Follow-through support is likely to be reestablished early in the session Monday as the bounce higher late last week could help to bring additional support over the next few days. The overall tone of the market remains extremely weak given the strong price pressure over the last few trading sessions. But this could spark some additional longer-term direction in the complex. Cash hog values are expected to remain mixed in a narrow but consistent range as seen over the last couple weeks with most bids 50 cents lower to 50 cents higher, although most bids are expected steady to 50 cents lower Monday morning.
| BULL SIDE | BEAR SIDE | ||
| 1) | Beef cutout values have bounced higher over the last couple of trading days. This has allowed the focus to move away from the continued strong pressure in futures trade andfocus insteadon the ability to sustain additional longer-term support through the complex. | 1) | Cash cattle values remain under pressure following the latest round of futures trade weakness. The overall lack of interest in packers aggressively moving into the market through the end of the year could limit the ability to bring support to futures markets. |
| 2) | Overall, open interest movement in live cattle contracts have moved in a consistent pattern day after day. Even though pressure continues in open interest levels, the consistency of liquidation is steady. This is focusing on steady and planned movement by traders, and has not led to additional widespread moves of liquidated positions due to the market downturn. | 2) | Strong pressure in feeder cattle futures has not been able to move price levels in front-month contracts back to September levels. This has evaporated the entire October market rally and is still leaving the complex extremely vulnerable for additional widespread pressure. A move below $140 per cwt is likely to spark additional long-term liquidation that may spread well into 2018. |
| 3) | Firm follow-through buyer support is redeveloping in pork cutout values. This is helping to establish additional longer-term support, with several primal cuts posting strong underlying support and gaining triple-digit values. | 3) | Lack of support in lean hog futures trade has led to additional underlying pressure in cash hog values and even though it has drawn increased volume to the market, the cash values continue to struggle. |
| 4) |
Renewed buyer support moving into lean hog futures trade late last week has helped to bring about additional longer-term market support. This could spark even more price gains based on potential commercial support moving back into the market through the end of the month.
| 4) | Despite the bounce in lean hog futures prices Friday, traders are still looking for a sense of support with prices still $2 over price support seen in November. This may create additional market uncertainty through the week as traders remain focused on readily available hog supplies over the next couple months. |
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