Cash cattle interest is expected to remain quiet through most of the morning, although packers and feedlot managers will likely focus on becoming slightly more aggressive just because of the short trading week and delayed start. Show list distribution and inventory taking will be the main focus Tuesday with moderate availability expected. The weaker cash market trend over the last month has followed the softness in futures and cutout values, but traders continue to focus on firm upcoming demand through the next several days and weeks. Mixed futures trade is likely early Tuesday morning as traders step into the complex with Friday's cattle on feed data. Even though cattle on feed and placement numbers are elevated from year-ago levels, values came in well below market expectations which had been factored into the complex. This is likely to bring moderate buying support to select contract months, although the cattle market still struggles with growing supply levels.
Aggressive technical pressure quickly developed late Friday with traders taking advantage of the long holiday weekend and limited end-of-week volume. The shift lower broke through initial support levels in June contracts, bringing about additional weakness through the entire complex. June through August futures posted limit losses of $3 per cwt, which sparked additional underlying weakness in all contracts, allowing widespread liquidation Friday. Increased tensions between U.S. and China has continued to soften the overall complex, but traders still focus on the potential of growing domestic and global demands, which should help to bring stability to fundamentals through the upcoming months. Cash trade is called steady to $1 lower Tuesday morning with most bids steady to weak. Expected slaughter Tuesday is at 469,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle on feed totals in Friday's report was well below pre-report estimates, which had adjusted trade interest through the end of last week. | 1) | Cattle on feed placements grew 9% from year-ago levels, adding additional concerns surrounding the ability to keep supplies in check through the rest of the year. |
| 2) | Live cattle futures continues to firmly hold above short-term support levels of $106.72 per cwt in August futures. This is expected to be setting the stage for additional underlying support through the entire complex. | 2) | Total cattle on feed levels are at the highest level of May since data has been collected in 1996. This is expected to continue to put pressure on overall supply levels through the summer months. |
| 3) | Pork cutout values bounced higher late last week ahead of the long weekend. This is helping to rekindle buyer interest as seasonal pork product demand is growing. | 3) | Limit losses in all summer contracts has sparked additional underlying weakness through the entire lean hog complex Tuesday morning. |
| 4) | Lean hog futures remain extremely oversold given the underlying growing pork demand on a global basis. This should spark noncommercial support redeveloping through nearby contracts over the next couple of weeks. | 4) | Follow-through weakness is likely in cash hog trade as packers continue to curb production levels in order to limit spending and potentially improve plant margins through the end of the month. |
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| #completeherdhealth |
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