Strong underlying pressure at the end of last week has caused underlying concern of follow-through pressure in early June. Last week, nearby live cattle futures broke through support levels, setting contract lows. This is expected to bring follow-through liquidation as August futures continue to look for support, although underlying softness in beef values the last couple of weeks is combining fundamental pressure with technical softness in the entire complex. Feeder cattle trade is leading the entire market lower after August futures took advantage of expanded trading limits Friday, holding a $5.10 per cwt loss at the closing bell. This accounts for a $9.50 per cwt loss in the last three sessions, significantly weakening the entire market tone. Concerns of recent gains in grain prices due to wet weather and delayed planting will cause concerns about feed supply availability for the next year. Even though the tone of the market remains weak, there will be an attempt to cover short positions on the first trading day of June, leaving the potential for buyer support to develop early Monday. Cash cattle trade is expected to remain undeveloped, with showlist distribution likely to be the main focus as bids and asking prices are not expected until later in the week.
Strong underlying pressure continued to develop in the lean hog futures late last week. This is expected to leave the markets generally weak, with mixed price levels possible in Monday morning trade. A combination of follow-through selling activity and short-covering is expected after the first of the month with traders balancing between an oversold market status, and still bearish news concerning global trade. The focus on outside market direction early Monday morning will also continue to be a significant market factor in the lean hog trade with traders closely monitoring the direction of grain trade as well as stock market activity. Cash trade is called steady to $2 lower Monday morning with most bids $1 lower. Expected slaughter Monday is at 465,000 head.
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| 1) |
Live cattle futures remain oversold following the sharp market losses late last week. The potential for early-month price adjustments is opening the door for firm buyer support to develop the next couple of days.
| 1) |
Feeder cattle futures tumbled sharply lower Friday. August futures once again set new contract lows, posting a $5.10 per cwt loss and closing at $133.12 per cwt. This broke below short-term lows set in May on the continuous chart, and may bring additional long-term pressure to the complex.
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| 2) | Mexico appears willing to open trade talks concerning immigration following last week's announcement by President Trump to impose tariffs on all imports from Mexico. Resolution of this issue would support beef exports to Mexico. | 2) | Beef values continue to erode through late May, adding to the concern that additional follow-through pressure may develop in the entire complex. Even though demand remains firm, the lower price levels may weaken the entire complex. |
| 3) | Firm pork cutout support developed through the end of last week, which helped to stabilize summer pork products such as ribs and belly cuts, and may help to bring some additional stability to the complex during early June. | 3) |
Sharp end-of-the-month losses developed in lean hog complex. This added concerns that additional weakness will develop during early June and further erode market premiums.
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| 4) |
Strong weekly sales to China were reported in last week's delayed Export Sales report with over 31,000 sales reported during the previous week. This indicates that even with increased tariff levels and trade war issues, China is needing to add to pork supplies.
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The trade war with China continues to be a major concern in the entire hog complex along with underlying weakness in the domestic price levels, strong pork supplies and limited domestic demand changes for the rest of the summer.
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