Cattle futures are expected mixed in limited early-week activity following additional late-week pressure. The strong turn last week sparked additional technical pressure through the complex that started to erode noncommercial support that had been building in the live cattle and feeder cattle trade through most of the spring. Little to no changes have yet developed in the fundamental direction of cattle trade, but at this point, traders are focusing on breaking away from recent market highs as they look for additional longer-term direction through the rest of the summer. Following mixed cash cattle trade last week, the focus Monday will be on inventory taking and showlist distribution. This is likely to push any cash business out to midweek or later.
Light to moderate follow-through pressure is expected early Monday morning following the slide of nearly $10 per cwt through the last half of April. Despite continued issues with African swine fever in China, traders have quickly pulled back from the over-aggressive nature early in the month. Some additional market adjustments are expected that will continue to keep markets volatile. But the overall lack of new information about either swine fever or a trade agreement with China will keep markets in limbo and generally weak in the near future. Cash trade is called $1 lower to $1 higher Monday morning with most bids steady to 50 cents lower. Expected slaughter Monday is at 475,000 head.
| BULL SIDE | BEAR SIDE |
| 1) Continued seasonal support is expected to help to solidify fundamental buyer activity through the cattle complex over the next several weeks. | 1) The continued pressure late last week pushed June live cattle futures to $115 per cwt. This is the lowest price level since November in June contracts, as traders continue to quickly back away from spring market highs. |
| 2) The recent sharp losses of over $7 per cwt in June live cattle futures is creating the opportunity to cover positions at the end of the month. This could allow for additional wide market shifts due to the extremely active open interest still holding through the complex. | 2) Firm pressure continuing in late 2019 contracts focus on the expectation that overall supply of cattle in feed yards will continue to grow. This is expected to overshadow the bullish expectations on demand in the last several months. |
| 3) Pork cutout values bounced higher at the end of last week, still putting the focus on the ability to aggressively move pork products through the domestic market. This will continue to add a sense of stability to cash and futures prices in the next couple of months. | 3) Strong underlying pressure through the end of the week is expected to limit any buyer interest in the last two days of April. This may continue to add increased pressure to the complex as noncommercial interest is quickly eroding. |
| 4) Trades will continue to look forward to Thursday's Export Sales report with expectations of additional buying interest from China. This could quickly reverse a portion of recent losses as traders still expect additional product movement into the China market in the next several months. | 4) Recent pressure in packer margins is starting to cause many packers to aggressively focus on lowering overall spending limits for market-ready hogs. This may lead them to cut procurement levels during early May in order to avoid additional spending. |
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