Buyer support is expected to redevelop in initial trade Tuesday morning as traders respond to the rally off recent market lows in feeder-cattle trade and try to push prices higher through early February. Even though the focus is on expanding prices higher in both live cattle and feeder cattle futures, the potential for position-taking after the sharp Monday rally is increasing. This could allow for widespread market volatility through morning trade, although the firming tone of the market is expected to continue through most of the week. Cash cattle activity is expected to remain sluggish as bids and asking prices remain undeveloped and likely will remain that way until Wednesday or later. Increased cattle on showlists could give an opportunity for packers to get caught up on buying needs, although feeders are expected to be aggressively pricing cattle through the week.
Follow-through buyer interest is expected when markets open as sharp triple-digit gains on Monday sparked by renewed technical support, at least temporarily. April futures led the complex to near limit gains after traders moved away from early-session lows of $59.65 per cwt. This was the lowest price point since last summer, as long-term support levels held. Due to the nearly unchecked pressure the last two months, there continues to be wide-open trading space before active buying interest may hit resistance. The biggest challenge facing the lean hog complex is the still-weak market fundamentals. This could bring about increased volatility in the near future. Cash hog trade is expected steady to $1 per cwt lower, although most bids are expected steady Tuesday. Slaughter runs are expected at 477,000 head Tuesday.
| BULL SIDE | BEAR SIDE |
| 1) Sharp gains developed in choice beef cutouts Monday. This support in beef values is expected to add even more underlying strength to the entire cattle futures complex through the week. | 1) Firm discounts continue to be seen in late summer and fall contract months. This could limit the longevity of futures support as traders are focusing on short-term demand needs. |
| 2)Firm cash market gains last week are expected to create higher asking prices from feedlot managers. The underlying support in futures trade will likely cause many of these managers to firmly hold onto price levels through the week. |
2)The sharp triple-digit rally in feeder cattle trade is expected to bring about even more volatility. This has the potential to add sharp losses through the feeder cattle complex. Depending more and more on movements and activity levels in the grain complex.
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| 3)Sharp futures gains took the market by storm Monday as prices surged higher as traders hold long-term support levels set last summer. This may uncover additional buyer strength that had been waiting months for a market bottom. | 3) Cash hog values still remain extremely weak, as packers still have adequate market ready hogs available at their disposal without aggressively shifting prices higher. Lack of consistency in Monday's market rally puts even more concern on long-term price levels. |
| 4) Strength in pork values created a sense of stability Monday when combined with strong futures trade. Even with supply concerns, the strong triple-digit move higher in pork cutouts spoke volumes. | 4) Late 2019 and early 2020 contracts struggled to post moderate gains of 20 cents to 50 cents per cwt. This continues to instill concerns of long-term supply building across the entire pork industry. |
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| #completecalfcare |
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