Cash cattle interest is expected to remain limited Monday morning with packers and feeders busy with showlist distribution and inventory taking. Bids and asking prices are not expected through the day. The limited trade reported last week should still keep packers short bought. This is likely to stimulate activity earlier in the week than last week, although the volatility in futures trade and beef values will likely limit early-week interest. Futures trade is expected to open mostly lower, although a combination of follow-through liquidation is likely with moderate short-covering following the triple-digit losses Friday. The increase in cattle inventory in feedlots at the beginning of the month is likely to add to the underlying market pressure with total cattle on feed at 102% of year-ago levels. This is above market estimates before the report. The combination of underlying weakness in the complex last week as well as growing cattle numbers is expected to put firm pressure on the entire complex.
Limit losses Friday is expected to create additional market volatility in the entire complex, allowing for expanded trading limits through the entire complex. July through October futures fell $3 per cwt lower in late-day trade as a significant technical reversal developed late last week. Due to limited volume early Monday morning, moderate short-covering interest is likely in the complex, leaving the markets potentially mixed during morning trade. Cash trade remains steady to $1 lower Monday morning with most bids steady. Expected slaughter Monday is at 477,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle marketed in May increased 1% from year-ago levels. This is a fractional bounce above pre-report estimates, allowing for potential focus on continued cattle movement through the spring months. | 1) |
Cattle on feed levels increased not only from year-ago levels, but also beat analyst expectations, placing larger inventory levels in feedlots. This is causing renewed pressure in an already weak cattle complex.
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| 2) | Moderate-to-firm export outlooks continue to develop for beef products in several areas of the country. Increased access for beef in the European Union will continue to stimulate firmer export demand through the upcoming months. | 2) | Sharp losses late last week created technical pressure in nearby live cattle trade with August futures moving below $102.50 and breaking out of the sideways market trend from the last few months. This is likely to create additional pressure in the near future. |
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Traders continue to look toward the anticipated trade talks with China scheduled for this week. This is a glimmer of hope that the hog market cannot lose sight of, as increased access to the Chinese pork market will be critical to stimulate strong long-term demand.
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Limit losses in nearby lean hog trade has not only allowed for expanded trading limits Monday, but sparked widespread liquidation. This could allow for additional long-term pressure developing across the entire complex.
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Hog futures remain oversold, with sharp losses the last two weeks moving prices to its lowest price since early March. This could help to bring about renewed short-covering, which may spark moderate interest from noncommercial traders through the early half of the week.
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Follow-through weakness in pork values developed at the end of last week. This is likely to create additional market pressure in the entire complex as traders close out the month of June.
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