Strong market pressure developed across the live cattle and feeder cattle futures with triple-digit losses in feeder cattle setting the tone for the weaker early-week activity. The early-week pullback is still seen as a market correction from the strong gains that developed last week, which has been heavily influenced by sharp losses in the stock market. Cash cattle trade remains undeveloped early Tuesday and is likely to be sluggish through most of the day with bids and asking prices possibly not developing until either late Tuesday or sometime midweek. This could leave further uncertainty in the development of futures trade over the near future.
Moderate to firm pressure that developed Monday in all but front-month contracts is likely to leave the complex unsettled once again. This may bring additional trade volume to the complex even though choppy, early morning trade may limit the longer-term direction over the next few trading sessions. Traders are focusing on the ability to bring increased trade direction to futures and cash markets, even though the recent tumble in outside markets may limit market stability over the near future.
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Despite the firm pullback in feeder cattle futures Monday, contracts are still sharply higher following the rally of nearly $7 per cwt in the first two trading sessions of February. This is creating some additional underlying buyer support in the feeder cattle complex that may spark increased support over the near future.
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Strong pressure that developed in both live cattle and feeder cattle futures has caused some traders to back away from the market support that developed over the last week. This could quickly add even more uncertainty to the complex, as traders look to take additional market protection early Tuesday morning.
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Packers are expected to remain short bought heading into the week following lighter cattle numbers sold last week. This should help to draw packers to the table, with the need to become more aggressive in order to gain access to needed supplies through the last half of the month of February.
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The sharpest point loss ever in the Dow Jones Index pushed stock markets 1,175 points lower and well under the 25,000 mark, which is creating uncertainty in all markets. This may add to the volatility through the rest of the week as traders continue to grapple with the quickly changing tide in the market and uncertainty as to just how much long-term impact will develop in livestock markets.
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| 3) |
Strong front-month spot lean hog contracts early in the week have helped to spark some additional buyer support and bring stability into the lean hog futures market despite lower prices in several other contracts. This may help to draw additional buyer support to contracts over the near future.
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Sharp losses in pork cutout values, especially in belly prices has created some limited concern through the entire complex. Additional longer-term pressure in cutout prices will quickly translate to further weakness in futures trade and move through the cash hog complex in the near future.
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Packers continue to focus on aggressive procurement schedules with an estimated 465,000 head in daily runs likely through most of the week. With no significant weather challenges expected to reduce packer chain speed, or moving hogs to market, there could be some additional focus on firming cash market activity in order to source needed hogs.
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The inability to hold last week's highs in most nearby lean hog futures has created some cautiousness through the entire complex. The current market remains in a sideways pattern, but if follow-through pressure over the next couple of days is able to break through lows set at the end of January, increased market pressure is likely to quickly develop in the near future.
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