The strong market shift lower Wednesday is expected to draw additional selling activity back into the complex Thursday morning. With cattle markets holding triple-digit losses through most of the midweek session in nearly all contract months, the focus on additional volatility being added to the market is leaving trade weak. Nearby contracts have quickly pulled away from recent 2018 highs. At this point, there is little danger of breaking through short-term support levels as April futures would need to fall another $3 per cwt before additional concerns would develop. But the concern of not being able to hold previous market gains may add even more market uncertainty. Cash cattle markets remain weak with limited activity in the complex. Light trade developed at $128 per cwt on a live basis, which is $2 per cwt lower than last week. This may bring additional packer interest to the market although initial interest is expected to remain sluggish Thursday morning.
Strong buyer support is moving into the complex with traders looking to move back into the complex following the recent market lows. It is uncertain just how much additional buyer support can develop given the pressure developing in the cattle markets. April contracts will need to move 70 cents per cwt higher in the near future in order to move through short-term support levels and spark additional buyer activity. Otherwise the market may continue to chop around in a narrow but well defined sideways pattern over the next couple of trading sessions. Daily procurement levels are targeted at 465,000 head Thursday with an estimated 126,000 head on Saturday.
| BULL SIDE | BEAR SIDE | ||
| 1) | Continued strong support in boxed beef values isbringing a sense of stability back to the beef market as traders focus on moving beef products at higher market values through the end of the month. | 1) | Aggressive market pressure seen in live cattle and feeder cattle futures quickly broke away from recent market highs. This is leaving the door open for a major market correction that could significantly impact nearby contract direction and push prices lower through the upcoming weeks. |
| 2) | Cattle placements are estimated to be nearly steady with year-ago levels in Friday's upcoming Cattle on Feed report. This would help limit the underlying pressure in the market. | 2) | Cash cattle trade started to crack late Wednesday with the triple-digit futures market losses eroding the resolve of feedlot managers. Although most of the cattle trade is yet to develop, the tone may have been set by the few cattle traded at $2 per cwt lower than last week. |
| 3) | The firm buyer support in the lean hog futures despite the losses in cattle trade is helping to solidify buyer activity in all contracts. This could build even more support through the end of the week. | 3) | Wavering support in pork cutout values is adding uncertainty to the complex. There is growing concern that the early-week support may not be able to hold despite follow-through gains in futures trade. |
| 4) | Underlying pork demand remains strong through early 2018 with increased focus on active movement in both domestic and export markets. This is likely to limit long-term pressure across the complex. | 4) | Cash hog prices continue to erode slowly following light-to-moderate activity in the complex. This is pointing to additional pressure early Thursday morning with traders focusing on the ability for packers to still gain needed hogs at steady to lower price levels. |
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