Limited futures activity is expected in live cattle and feeder cattle trade this week with early-week lossesand short-covering opportunities unlikely in most of the complex. Live cattle futures pulled back nearly $3 per cwt from last week's highs, so it is uncertain if the wide trading range will be sustained, leaving the market in sideways pattern, or if March lows will be tested through the end of the month. More stories are surfacing about the number of cattle lost in the flooding and severe winter blizzards, butisn't creating a significant overall market impact yet. Even though these losses have a dramatic impact on local and regional areas and are devastating to producers, the fact that losses are not widespread is likely to minimize the overall impact on futures trade. Cash cattle markets remain undeveloped, although a few token packer bids may start to surface on Wednesday. It is likely that trade will be delayed until sometime Thursday or Friday.
Mixed trade is expected to once again develop with underlying firmness in the lean hog trade based on long-term demand and export expectations. Even though little new news is available, traders remain hopeful and optimistic that trade talks with China will bring about not only results, but more specific information about what an overall trade agreement will look like when it comes to moving U.S. pork to China. This can also be a double-edged sword, as recent emotional support has built this relationship up and helped to move prices where they are currently, so anything but stellar news could eventually limit follow-through support. Cash hog values are expected to redevelop steady to $2 per cwt higher with most bids $1 per cwt higher Wednesday morning. Expected slaughter Wednesday is at 477,000 head. Saturday runs are expected at 146,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Underlying beef demand continues to firm as traders focus on the upcoming spring and summer "grilling season." Given the long, cold winter in many areas, any sense of warmer weather may spark increased overall consumer interest in the next couple of weeks.
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The inability to hold last week's market highs in live cattle and feeder cattle trade is causing concern that the $130 price level, which has held for over a year, may be unattainable at this point, and prices may continue to hover between the $120 and $130 per cwt levels long term.
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| 2) |
Beef values have continued to firm once again following mixed market movements last week. The focus on increased movement and domestic demand support is likely to help support trade through the end of the month.
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Feeder cattle futures have fallen nearly $3 per cwt in the last couple of trading sessions, as concerns of increased available cattle moving into feedyards through the spring and summer is derailing previous market support.
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| 3) |
Strong futures support in spot April futures has sparked increased overall buyer interest, moving prices to new contract highs, and opening the door for price levels above $80 per cwt in the April market.
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Firm pressure through the week in summer lean hog contracts has limited overall support concerning China trade deals. The fact that support was limited in May through October trade is pointing to uncertainty at current market levels.
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| 4) |
Firm support in cash and wholesale pork values will continue with further sales activity to China.
| 4) | The looming threat that African swine fever may continue to spread to North America continues to keep the entire complex on edge. This would quickly shift the focus away from providing pork for other countries, and significantly affect production levels domestically. |
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