Increased cash market interest is expected
Wednesday morning with limited initial packer bids developing, while
asking prices are expected to become more evident as the day develops.
Given the overall tone of the cattle complex and wholesale beef values,
it is likely that steady money at the end of the week would be
considered a bullish move. Bids are expected to develop near $115 live
and $185 dressed, but both sides will be closely focusing on the
direction of futures trade during the morning. Limited volume is
expected in live cattle and feeder cattle futures trade with the focus
split between follow-through selling pressure and short-covering. Some
additional adjustments are expected the next couple of days as traders
try to prepare for Friday's Cattle on Feed report, expecting bearish
market shifts developing due to increased supply levels in April. This
may continue to add moderate-to-strong weakness through all cattle trade
with feeder cattle markets potentially giving back the moderate gains
from last week, testing short-term lows once again.
Despite lean hog futures still trading within
the moderate-to-wide sideways trend set up over the last two weeks,
renewed pressure in the entire complex has moved the emphasis back to
concerns surrounding China and the ongoing trade war. Even though China
will continue to need large amounts of pork to replace production lost
by African swine fever, the breakdown in talks and the overall
relationship between the two countries is making it evident that buying
pork from the U.S. will be a last resort. Many market watchers continue
to hold out hope that a deal will be established, or that domestic pork
will move to other countries needs so they can export to China. But the
overall outlook is becoming cloudy and traders seem to be losing hope of
a quick resolution. Cash trade is called steady to $1 lower Wednesday
morning with most bids steady. Expected slaughter Wednesday is at
465,000 head. Saturday runs are expected at 43,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Expected beef marketed during April is expected to have shifted higher as Cattle on Feed pre-report estimates have been circulated. This continues to point to underlying strong spring demand. | 1) |
Traders are looking for record
cattle placements and total on-feed numbers in Friday's Cattle on Feed
report. This is confirming the previous market slide over the last month
but is also adding additional pressure in the entire complex.
|
| 2) |
With the Memorial Day holiday
quickly approaching, traders are expecting a strong clearance of beef
products following the cold and wet spring. Strong holiday demand could
spark renewed post seasonal beef demand in the next several weeks.
|
2) |
Strong underlying support in grain
trade continued to add production costs to feeding cattle, which will
negatively impact feeder cattle prices.
|
| 3) |
Firm underlying support in pork
cutout values not only focuses on improved product movement, but active
price gains in several seasonal products is pointing to increased summer
demand.
|
3) |
The strong pressure in lean hog
futures has moved away from long-term global demand support and shifted
back to growing concerns with China. This shift will likely continue
through most of the summer, limiting upside potential of pork values.
|
| 4) |
Lean hog futures still remains well
above short-term support levels, as market corrections continue to
develop ahead of the holiday weekend. This is expected to rebuild buyer
interest as traders shift prices within a sideways trading range.
|
4) |
Cash hog values are expected to show
additional weakness as packers limit overall plant schedules in order
to limit the amount of hogs needed to purchase. This is an attempt to
improve plant margins given the volatility in pork prices.
|
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| #completeherdhealth |
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