Friday Morning Livestock Market Summary - Falling Cash May Be Difficult to Overcome

GENERAL COMMENTS: 

Technical weakness has dominated the cattle market. The market is severely oversold, but support remains elusive. The weakness has stemmed from lower cash this week with cash prices falling from $3.00 to $5.00 per cwt. Spillover selling from feeder cattle is affecting live cattle and vice versa, which continues to feed the selling frenzy. Futures could stabilize or bounce into the end of the week, but that may take a monumental effort and some friendly news to trigger short-covering. That seems unlikely based on the steep declines of the past two weeks.

May and June hogs showed significant price divergence as spread trading was evident. It did not take much to cause the divergence due to trading volume. There were only 552 futures contracts traded in May Thursday compared to 28,361 contracts in June. However, October 2019 through April 2020 contracts showed substantial losses as well. Traders still remain hopeful China will purchase more pork in the near-term, but traders are cautious over prices later in the year.

 


  

  

BULL SIDE

 

  

  

1) It is the end of the week and the magnitude of the sell-off
  could trigger some profit-taking into the weekend. This would relieve the
  oversold technical situation.

 

  

  

2) Most of the cash activity is finished for the week, which
  could bring back some optimism as feedlots look to next week. Even the idea
  cutouts could stabilize next week might improve the resolve of feedlots to
  hold for higher prices, which could support futures.

 

  

  

3) Hog futures have not declined as dramatically as cattle and
  seem to have found some price support on China demand and potential for
  further purchases.

 

  

  

4) Hog futures bounced off support early in the week with
  three consecutive days of gain in the June contract. A surge in pork cutout
  values should continue to support the market. 




   


    

    

     


      

      

       


        

        

         


          

          




          

          

BEAR SIDE

         

          

          




          

          

1) The cattle market appears to be bottomless with
          buyers continuing to be run over. The market is severely oversold,
          but the path of least resistance is down.

         

          

          




          

          

2) Cash trade is mostly wrapped up for the week, and
          there was a lot of blood -letting. Cash trade $3.00 to $5.00 lower
          than the previous week does not bode well for next week.

         

          

          




          

          

3) Despite June hogs posting triple-digit gains
          Thursday, surrounding contracts are struggling to maintain upward
          momentum. Lower cash on the National Daily Direct report Thursday may
          keep a lid on price potential.

         

          

          




          

          

4) The absence of additional pork sales to China on
          the weekly Export Sales report may reduce the desire for traders to
          aggressively buy futures positions due to business with China being
          very inconsistent. Traders may need hard evidence before becoming
          more aggressive.

         


       

        

        

       


     

      

     




   

    

    




    

    




   


 

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