Traders are returning from the long holiday weekend with a sense that the focus through the upcoming days and weeks will be placed on summer demand and post-holiday activities. Traders will closely monitor overall movement in the market as they try to quickly assess overall beef product demand over the last weekend. This may help to give a clear indication as to what can be expected between now and the Fourth of July holiday. Warmer temperatures in many areas are likely to help spark additional consumer demand. Early cash market activity is expected to remain sluggish following the lackluster market movement last week. But this could set the tone for an end-of-the-week showdown. But for the most part, inventory-taking and showlist distribution is the main focus Tuesday. Futures trade is expected steady to firm following the late week rally Friday following the Cattle on Feed report, which posted overall placements at 92% of year-ago levels.
Cash hog prices are expected to be steady to firm through early Tuesday trade as traders return from the long holiday weekend. With the Memorial Day holiday weekend in the rearview mirror, traders in the cash and futures complex are not only looking at increased overall support from future summer demand, but the expectation that overall buyer support may continue to develop in the futures trade to build on the recent market gains. Following a strong market pullback during the last couple of weeks, the focus on rebuilding underlying market support through early summer is likely to help to spark some uniform market direction.
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| 1) | Sharp end-of-the-week gains in feeder cattle futures Friday morning has helped to draw additional underlying support into the entire cattle complex. Some additional follow-through support is expected on Tuesday as increased trade volume is likely following the holiday weekend. | 1) | Increased overall cattle on feed numbers continues to weigh on the overall beef industry. Cattle on feed levels were pegged at 105% of year-ago levels. Even with upcoming summer demand support for beef, beef will continue to be readily available and easily accessible through most of the summer and fall. |
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Increased attention will be given to the weekend and holiday clearance of beef products over the last few days. Overall beef product movement is expected to remain strong with traders focusing on the ability to take advantage of the warmer, even hot weather in many areas. This could spark some buyer support in both cash and futures trade through the end of the month.
| 2) | Live cattle futures have struggled to follow the strong market rally seen in the feeder cattle complex. Traders seem to be taking a more moderate and cautious approach to the direction of live cattle trade through late May. This may limit follow-through direction during the holiday shortened week, and keep potential buyers on the sidelines. |
| 3) | Nearby lean hog futures have posted a strong market rally at the end of last week. This pushed nearby contracts over $2 per cwt higher from recent market lows. The expectation is that additional volume will quickly move into the market with more and more traders back in the saddle following the holiday weekend. | 3) | Market uncertainty in pork cutout value following the volatile price shifts through the last several trading days is expected to keep many traders on the sidelines. Ample pork product is expected to be available to buyers, which may limit a strong, early-summer rally. |
| 4) | Cash hog market support is expected to continue to develop early in the week. Although overall trade direction is not expected to change significantly, the focus on buyers moving back into the complex for summer needs is likely to help to firm cash bids through the end of the month. | 4) | Lack of buyer support in spot month June contracts late last week continues to keep many traders cautious through the end of May. The limited support could continue to put more and more focus on long-term demand and price shifts in late summer and early fall, rather than near-term market buying activity, limiting both spot month futures price and fundamental support. |
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