Cash cattle activity is expected to remain sluggish Thursday with most of the business for the week already in the books. With trade developing Tuesday and Wednesday in all areas at prices $2 to $8 per cwt lower than last week, the weaker market tone is likely to have limited the desire for feedlot managers to be aggressive the rest of the week. There could be some additional live trade developing in the North in the next couple of days, but essentially the market tone has been set, allowing for limited price movement in the near future. Futures trade is expected mixed to mostly lower with early short-covering mixed with follow-through market pressure. The continued weakness in feeder cattle trade has led the overall market lower, sparking uncertainty surrounding the overall direction of the market in the upcoming days and weeks.
Underlying pressure continues to develop in the lean hog complex with initial trade expected to be mixed to mostly lower. The weaker tone has not changed, but with current price levels, the opportunity to cover short positions may bring some limited buyer interest back into the complex. The overall focus through the lean hog trade will be the weekly Export Sales report as traders look for additional sales to China last week. The development of trade talks with China concerning a trade deal will also direct overall market direction given the back and forth uncertainty as to how close China and the U.S. is to making a deal, or if one can actually be reached. Cash trade is called steady to $1 lower Thursday morning with most bids steady. Expected slaughter Thursday is at 474,000 head. Saturday runs are expected at 13,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
The extreme oversold status of the live cattle futures is leaving markets ripe for a sharp and aggressive market rebound. This could quickly rekindle noncommercial interest.
| 1) | Aggressive pressure in beef cutout values through the week has quickly eroded wholesale beef prices. This has also significantly widened the select to choice price spread during early May. |
| 2) | Long-term beef demand still remains strong, which is expected to limit additional pressure in both futures trade and wholesale beef values in the upcoming weeks. | 2) | Aggressive triple-digit losses in feeder cattle trade has continued to lead the overall cattle complex lower. The inability to hold year-old support levels is adding even more bearishness to the entire cattle market. |
| 3) | Cash hog values have continued to stabilize as packers continue to actively search for market-ready hogs to fill the aggressive procurement schedules. | 3) | Uncertainty of China sales in the upcoming Export Sales report Thursday morning is adding volatility and weakness to the entire lean hog complex. Without a significant shift in reported export sales to China, it is likely that continued selling will be seen. |
| 4) | Hopes and expectations of a strong Export Sales report Thursday morning is likely to spark some limited optimism in the lean hog complex. | 4) |
With the latest round of trade talks with China developing Thursday, the focus on uncertainty that the two sides will be able to move past principle points in order to come to a mutual agreement is starting to be questioned. This would quickly derail the entire process.
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| #completeherdhealth |
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