Additional market pressure is expected to slowly develop through early trade Monday morning with the strong triple-digit weakness from late last week creating additional market uncertainty. With feeder cattle futures breaking through initial market support last week, a combination of follow-through market pressure and short-covering is likely to develop through morning trade. Cash cattle activity is expected to remain at a standstill. Following generally steady price levels last week, showlist distribution and inventory-taking will be the main order of business Monday.
Initial trade is expected to remain mixed with follow-through pressure in nearby contracts curbed with short-covering in several contracts across the complex. There is uncertainty about how much buyer support may develop through the next couple of weeks in lean hog trade. The strong pressure in cattle trade over the last week is starting to erode a portion of the nearby market support in lean hog futures. This may add even more price shifts through the next several trading sessions. Cash hog values are expected to remain steady to $1 per cwt higher, with most bids 50 cents higher. Packer activity is expected to remain active with an estimated 477,000 head on Monday.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Firm cash cattle trade last week continues to support underlying beef market fundamentals through early January, allowing for increased expectations of steady to strong upcoming demand.
| 1) |
Feeder cattle futures have broken through initial market support at $145.35 per cwt Friday. Continued pressure will target December lows of $144.20 per cwt. A move below this level is expected to spark additional widespread liquidation.
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| 2) |
Despite the strong market pressure in live cattle futures last week, beef values have still remained firm. This is likely to add some additional underlying buyer support through the entire complex the next couple of weeks.
| 2) |
The sharp losses developing in live cattle and feeder cattle trade is curbing expectations of firming cash cattle trade through early January, even though cash markets are not expected to trade until late in the week, futures market weakness makes strong cash cattle trade an uphill battle.
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| 3) |
Strong packer margins have continued to fuel active procurement rates even at higher cash hog price levels. This is helping to spark additional interest from packers to push the production envelope following the holiday season.
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Underlying weakness in the cattle trade is starting to erode previous support across lean hog futures trade. This may limit not only trader involvement Monday, but the potential to add to recent market support in early January.
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| 4) |
Continued strong pork demand is expected through the upcoming days and weeks, which despite the continued move to keep pork inventory levels elevated, is limiting market pressure based on active supplies.
| 4) |
Active cash market support last week could be quickly limited if pork values and lean hog futures trade is not able to continue to spark renewed interest in the next couple of trading sessions. This may limit packer interest.
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