Sluggish activity is expected through all cattle trade early Thursday morning with light to moderate buying likely to slowly developover the first couple hours of trade. There is increased market interest in deferred contract markets, which may help to spark renewed longer-term buyer support. The underlying concern surrounding the volatility in outside markets is likely to still keep markets shifting in a moderate range through the end of the week. Cash cattle trade is still undeveloped although packer interest is likely to be more persistent through the day. It is possible that with firm moves across the future trade, some light activity may develop in cash markets before the end of the day Thursday.
The overall tone of the lean hog futures complex remains weak with prices falling nearly $4 per cwt during the first half of the week. This aggressive price pressure is not only heavily influenced by the overall lack of support in outside markets, but growing concerns of pressure and trade tension in global markets has also limited the potential for buyer support as traders look at potential demand shifts. April futures have led the market lower with a $2.20 per cwt loss midweek. This is likely to draw additional follow-through pressure early in the complex Thursday morning, although there will be an attempt to establish short-covering, but as of now, it is undetermined if any buyer interest will be strong enough to outweigh the market weakness in the complex. Cash hog trade is expected to remain weak with bids likely steady to $2 per cwt lower, although most bids are likely to remain $1 to $1.50 lower early Thursday morning.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Despite the recent market pullback in futures trade early in the week, boxed beef values continue to firm, with higher beef values likely to help spark some additional underlying interest through the next couple of days.
| 1) |
The inability to hold market support through the end of the trading session in nearby contracts is expected to create some underlying tension through the complex. This could bring additional pressure into both live cattle and feeder cattle markets during the last half of the week.
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| 2) |
The upward market shift in deferred live cattle and feeder cattle markets seen Wednesday, has helped to rekindle the underlying buyer support in the market over the last couple of weeks. As traders continue to focus on potential demand growth through the upcoming spring and summer months, there is the potential that strong buyer activity may steadily develop over the coming days.
| 2) |
Cash cattle trade has still shown no interest in developing at any price level going into Thursday morning. Although feeders continue to hold onto firm, early asking prices, the concern that the pressure early in the week may heavily influence cash market activity and limit price support by the end of the week.
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| 3) |
The availability of market-ready hogs is starting to slowly tighten through early spring months, which is likely to be evident by the moderate pullback in weekend slaughter activity. A total of 85,000 head is expected to move across packer floors on Saturday, which is likely to indicate the limited supply available to processors.
| 3) |
Sharp losses in ham and belly primal cuts once again has created additional weakness in the pork cutout values. This is causing additional concern through the first quarter of the year as belly prices have tumbled over $20 per cwt through the first half of the week and is creating some widespread weakness through the entire complex.
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| 4) |
Despite the sharp futures trade losses, overall open interest across the lean hog futures complex has been able to remain well intact. Even though continued contract erosion is seen in the February contracts due to this contract expiring in the near future, the focus of most other nearby contract interest is to hold firm.
| 4) |
Sharp losses in nearby April futures has caused significant technical damage to the entire lean hog complex. With the most recent tumble seen Wednesday of $2.20 per cwt, April lean hog futures has now taken out short-term support seen in both November and December. At this point, prices are at the lowest point since September 2017. If markets continue to erode with triple-digit losses through the morning Thursday, these support levels will also be in danger, setting the next target range at the 2017 market low of $65.67 set in August of 2017.
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