Cash cattle markets remain undeveloped early Tuesday morning, and are likely to stay silent for the next day or so. This may allow for some midweek bids to trickle into the market, although at this point, trade activity is not expected until late in the week. The bounce back in futures prices Monday will allow both packers and feeders to focus on market direction, which should keep prices steady to firm in the first full week of January. Early futures trade is expected to remain sluggish as spillover buying will likely attempt to establish a firming trend Tuesday. Limited volume through the first couple of hours is likely to keep gains to a minimum.
Follow-through cash market support is expected to quickly move into the market Tuesday although packer interest is not expected to be significantly changed from previous days. Early bids are expected steady to $1.50 per cwt higher with most bids hovering near 50 cents per cwt higher. Packers continue to focus on pushing as many hogs as possible through plants, even at higher price levels due to the current margin levels packers have sustained. These margins may erode as the month continues, leaving packers aggressive at this point. Futures trade is expected to open mixed with limited direction through the first couple hours of trade. A combination of spillover selling and short-covering is likely to encompass nearby contracts. Hog slaughter is expected at 477,000 head Tuesday.
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Strong market support in stock market levels is helping to add renewed energy to the livestock complex. The Dow Jones Index has bounced nearly 2,000 points in the last two weeks, trading at the highest level since the middle of December.
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Limited support in beef cutout values Monday may quickly limit follow-through buying in futures trade. The inability for wholesale beef prices to move higher during the week may quickly derail support in nearby live cattle contracts.
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The strong early-week surge in live cattle futures has quickly limited the market correction last week. February futures are less than $1 per cwt below contract lows, allowing the focus to move back to potential strong January beef values.
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The longer the shutdown of the federal government continues, the more nervous all trades will become. This will include ag commodity markets, including cattle futures.
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Active domestic buyer activity continues to swarm the pork complex with additional buyer support moving into Monday's pork cutout values. Despite active processor activity and large hog numbers, the outlook for pork continues to improve.
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Hog futures were unable to regain supportive market shifts Monday. Even though the pullback in nearby prices may not signal additional strong buying, the fact that buyers are not swiftly toward the market seems to indicate some uncertainty about future gains.
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Firm support above recent market lows is helping to stabilize front-month February contract months. With February futures trading nearly $2 per cwt above December lows, the focus on rebuilding market support continues to strengthen.
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Choppy moves have been seen in pork cutout values through the last couple of weeks. This is likely to add even more uncertainty about the longer-term direction of the market even though packers have started to bolster cash market prices as they keep fueling procurement levels.
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