Prices appear to be set in cash cattle trade following trade Wednesday and Thursday. This is expected to spark limited additional end-of-the-week movement with some cleanup activity possible, but most feeders are likely to hold off until next week given the bearish moves in futures trade at the end of the week. Live trade was at $115 in the South and $116 in the North, which is generally steady with last week's levels, while dressed trade developed late Thursday at $186 to $187 per cwt, $1.50 to $2.50 per cwt lower than last week. Futures trade remains under pressure following limit losses of $4.50 per cwt in feeder cattle trade, sparking additional bearishness in the entire cattle complex. A combination of follow-through selling pressure and an attempt to cover short positions at the end of the week and month is likely to keep markets moving in a potentially mixed and volatile range.
Mixed trade at the end of the week continues as traders focus on wide market swings through the week and underlying pressure in neighboring cattle trade. Traders are watching for potential demand for pork from China and the ongoing trade war, and will be looking closely at the holiday-delayed release of the weekly Export Sales report. There is hope of additional strong sales of pork to China, but given the cold shoulder between the two countries, it is becoming expected less and less each week. This does not negate the fact that global demand for pork continues to grow, leaving a need to fill the gap with U.S. product in some fashion. Cash trade is called steady to $3 lower Friday morning with most bids $1 lower. Expected slaughter Friday is at 470,000 head. Saturday runs are expected near 250,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Cattle futures remain oversold at the end of May, creating the potential for active noncommercial buyer interest to reenter the market in the upcoming weeks.
| 1) |
Active gains in grain trade have quickly put cattle futures into panic selling mode with feeder cattle futures closing limit lower with $4.50 per cwt lower. The sharp gains in corn markets is causing uncertainty of further production costs and feed availability long term.
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| 2) | Beef demand continues to remain strong, allowing for expectations of active domestic and export movement in the summer months. | 2) | Live cattle futures quickly followed feeder cattle lower Thursday with $2.80 per cwt losses seen in August contracts. August futures settled at $105.05 per cwt, which is testing contract lows set in May last year. A move below these support levels would likely spark additional liquidation at the end of the month. |
| 3) | Traders look for the potential of moderate-to-strong pork sales to China in the weekly Export Sales report. Sales last week would indicate a two-week stretch of product movement, causing expectations that further sales will steadily develop in the summer months. | 3) |
End-of-month positioning is expected to develop Friday, allowing further weakness to develop in lean hog trade.
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| 4) | Underlying short-term support in July futures remains at $85 per cwt, allowing traders to rebuild on these market lows through the end of May. If this price is able to hold, firm underlying buyer interest is likely to redevelop in the coming days and weeks. | 4) |
Sharp double-digit losses in belly primal cuts Thursday caused the pork cutout value to move sharply lower. A lack of support in bellies is causing concern that demand for traditional summer pork products is not growing at the end of May.
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