Feeder cattle futures have regained substantial market support, moving $6.50 per cwt in the last week as buyers quickly and aggressively move back into the complex. Although there is growing uncertainty about corn prices due to late planting, and the amount of acres that will not get planted into corn, the emotional rally seems to have faded after firm corn market losses Wednesday. This may add additional upward momentum to cattle trade at the end of the week. But the upside of the market will also be limited by supply concerns as increased fed cattle numbers are likely through most of the summer. Live cattle futures are still near contract lows despite the light support the last two days, which is weakening the market but is showing potential for additional buyer support to trickle back into the complex. Cash cattle trade appears to be generally finished in the South, although there may be some cleanup business in the next couple of days. Dressed trade in the North is undeveloped, although a few sales in Nebraska at $183 per cwt late Wednesday could help to establish the tone. Generally, prices are expected to remain steady with early-week trade, but $2 to $3 per cwt lower than last week levels. The remainder of trade could drag out over the next couple of days.
Firm support in deferred lean hog futures is expected to redevelop Thursday morning, although the tone of the market is likely to remain mixed as increased softness is likely to develop in nearby trade. Traders will closely monitor the weekly Export Sales report coming out Thursday morning, and the overall amount of sales to China could be an underlying factor in late-week market moves. With July and August contracts trading near $86 per cwt, traders continue to focus on firm summer-market support despite the continued premium to cash-market trade as expectations of firming domestic demand is keeping buyers active. The pullback in grain trade the last couple of sessions, as well as increased buyer support in financial markets, seems to be easing the overall concern of bearish market direction, allowing for traders to move back into the complex at the end of the week. Cash trade is called steady to $1 lower Thursday morning with most bids steady to weak. Expected slaughter Thursday is at 476,000 head. Saturday runs are expected at 50,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Sharp triple-digit gains in feeder cattle has sparked increased underlying support in the cattle complex in the last half of the week. | 1) | Cash cattle trade has continued to weaken the last few weeks with an additional $2 to $3 per cwt loss from last week's levels seen over the last couple of days. |
| 2) | Aggressive pressure in grain trade midweek, and continued softness in prices through overnight trade, is sparking additional buyer support in feeder cattle and live cattle trade. | 2) | Despite the recent buying, live cattle trade still remains weak with prices hovering near long-term lows. The overall concern of widespread market pressure and economic slowdown due to the trade war is likely to limit upside market potential. |
| 3) | Cash hog trade is likely to firm up by the end of the week as packers continue to locate market-ready hogs to keep up with expected strong plant speeds over the next couple of weeks. | 3) | Firm pressure continues in pork values this week, leaving traders concerned that overall product movement is sluggish, especially in traditional summer products such as ribs and bacon, which has seen the most significant pressure in wholesale prices this week. |
| 4) | Strong underlying support is developing in fourth quarter 2019 trade midweek, sparking expectations of long-term demand support. | 4) |
Nearby June lean hog futures remain at a strong discount to other summer contracts, limiting short-term support across the complex.
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