Sharp losses that developed in feeder cattle trade Tuesday afternoon sparked additional spillover selling activity across the entire cattle complex. This will open the door for additional price pressure as nearby contracts have continued to break through support levels. The pressure in feeder cattle markets broke through November lows of $149.55 per cwt, sparking additional liquidation and widespread losses through most cattle contracts. Early trade is expected to focus on short-covering and a combination of widespread liquidation with traders focusing on the potential for additional strong losses. As seen through the week, initial market support in cattle trade can quickly erode due to light trade activity and depth of buyers willing to return to the market. Cash cattle markets posted sluggish trade activity following the market tumble with a handful of cattle traded in the South at $117 per cwt. There were a few cattle reported sold in Iowa at $123 per cwt late Tuesday. But there is not enough activity to develop a market trend.
Futures trade continues to weaken following the aggressive triple-digit pressure that has developed in nearby contracts. This is expected to spark additional concerns that the recent market support may erode over the near future. Even though support continues in pork values, the focus on available hogs ready for market and questions about if there is enough demand through early 2018 to clear all of these supplies, may wear on the market. Cash hog values are expected to open mixed in a narrow range from $1 per cwt lower to 50 cents higher. Daily hog runs are pegged at 465,000 head with 215,000 head seen Saturday.
| BULL SIDE | BEAR SIDE | ||
| 1) | The ability to create stability in the spot month December live cattle futures is creating a little calm through the last few days with prices holding near $116.50 per cwt. This overall lack of direction in spot contracts may help to draw some commercial traders back into the market through the end of the week. | 1) | Sharp losses in feeder cattle futures have set the tone for additional market liquidation. As front-month futures have broken through support levels at 149.50 per cwt, this allows feeder cattle markets to move through recent support. The next support level is expected to be the September low of $140.95. |
| 2) | Beef values continue to shift higher during the week, bringing evidence that even with the sharply lower futures prices in the last few days, continued support remains in the market. This could help to limit follow-through liquidations as traders turn to fundamentals to help calm the volatility of the market. | 2) | The underlying shift lower over the last week in futures trade has accounted for a $6 per cwt sell-off in front-month futures since late November. This is creating additional widespread weakness across the entire market and is likely to spark additional liquidation through the rest of the week. |
| 3) | Pork values continue to see strong underlying support as the ability to move pork product even though supplies remain available is helping to stimulate buyer support in all areas of the market. This could bring additional market support over the near future. | 3) | Strong market pressure developed Tuesday as traders try to focus on squaring positions following the most recent market support. The aggressive move lower in the cattle complex continues to have increased influence in all markets, allowing traders to quickly back away from previous support. |
| 4) |
Despite the recent pullback in futures trade, cash values have seen significant market support in the last couple of trading sessions. Follow-through buyer interest is expected todevelop over the near future.
| 4) | Traders continue to struggle to break through short-term resistance levels of $65.75 per cwt. This overall support may continue to limit additional buyer support over the next several days and bring additional volatility to the complex. |
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