Limited interest is likely to develop in cash cattle markets Monday as traders not only are moving into a new week, but also into a new month and quarter, so interest is expected to be limited to new showlist distribution and inventory taking. More focus will be placed on inventory taking this week with additional contract deliveries expected during the first two weeks of the month. Futures are mixed with traders looking for longer direction following the strong moves lower last week. Even though April contracts moved below support levels in the last couple of trading sessions, the focus is moving to June futures, which has a $6 to $7 per cwt discount to spot April futures. The focus on potential long-term beef demand growth is being clouded by strong pressure in futures markets the last couple of weeks.
Continued pressure through the last half of the week has sparked renewed questions about how strong the overall lean hog futures remains going into the second quarter of the year. There are underlying expectations that pork demand support and growing export demand to China will continue as trade negotiations with China continues. The lack of consistency of pork buying in the last three weeks, according to weekly export sales reports, seems to be pulling back from previous market optimism. If the hog market is going to live and die on the Thursday export numbers to China, the volatility may remain intense. Trying to make sense of China's buying patterns is hard, if not impossible. One only has to look at the grain sales in the last decade to understand that this is far from a simple and straight forward market. Cash hog values are likely to start the week and month of April steady to $1 per cwt higher with most bids firm on Monday morning. Expected slaughter Monday is at 477,000 head.
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Strong beef demand is expected to continue in the next two months as temperatures should move back to more normal patterns, sparking additional grilling activity, which increases overall beef demand.
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Cash market weakness last week is creating concerns that follow-through pressure may develop through the next couple of months, leading both sides to focus on short-term availability and long-term demand.
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Summer live cattle contracts are still holding well above 100-day moving averages, despite the pull back from early support in the month of March. This may help to spark some renewed buyer activity as traders focus on a market near oversold status levels.
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With April futures moving below short-term support at the end of last week, June and August futures are testing March support levels at this point. A moderate shift lower Monday morning would break through these support levels, potentially sparking additional market pressure during early April.
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Despite the strong two-day pullback in lean hog futures, the complex moves into the month of April near contracts highs, with long-term optimism based on expected global demand that needs to be met.
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Sharp triple-digit losses in all contracts sparked renewed concern of pulling back from recent market gains. This shift at the end of April may have been more positioning related than long-term direction but still creates growing uncertainty.
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Cash hog values continue to ratchet higher, sparking additional buying interest from packers who are searching for additional market-ready hogs to fill the aggressive plant capacity that has developed through the last several months.
| 4) | Pork values have quickly stabilized and broken away from strong gains the last two weeks. This is creating even more concerns that current inventory levels may have a hard time moving in the current market range. Additional pressure through the next week could quickly erode fundamental support, which has quickly and aggressively developed through the hog complex. |
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