Cash cattle activity is expected to remain sluggish Thursday morning following limited interest earlier in the week. Although a few cattle have been sold in the North on a dressed basis at $180 per cwt late Wednesday, the market is still undefined. It is uncertain just how many cattle will need to be purchased this week due to the upcoming holiday weekend and cattle already committed for later delivery in early July. Initial token bids in the first half of the week were around $107 live and $175 dressed and are expected to be floated once again by packers, but unlikely to get any attention as asking prices are much higher in all areas. Asking prices are expected to remain at $112 to $114 per cwt live basis and $180 to $183 dressed basis, with some firmness possible in asking prices if futures trade continues to show support. The aggressive turn around in cattle futures Wednesday sparked limit gains in front-month feeder cattle futures. This will allow for expanded trading limits Thursday in all feeder cattle trade. The daily limit will move to $6.75 per cwt, allowing for increased potential market swings. Although it is premature to assume that strong follow-through support will continue to shift market trends higher, the move away from contract lows will not be lost on traders. Firm follow-through support is expected in all cattle trade Thursday morning, although initial support is likely to be curbed by moderate position-taking during early trade before active volume enters the complex. Beef values remain sluggish, although the shift higher in futures trade and expected firm holiday demand should help to improve overall movement in choice and select cuts.
Mixed trade is expected in lean hog trade early Thursday morning following moderate price shifts through the week. The lack of active support midweek is creating additional uncertainty about end-of-the-month support in the next two trading sessions. Nearby contracts have continued to hover near long-term lows, but limited direction is likely if prices are able to hold in the current range, just above support levels set earlier in the week. Concerns about short- and long-term export pork demand as well as building domestic demand has continued to spark some uncertainty, which will lead to expected mixed trade Thursday and likely into the end of the month. Cash trade is called steady to $1 lower Thursday morning with most bids steady to weak. Expected slaughter Thursday is at 477,000 head. Saturday runs are expected at 57,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Limit gains in feeder cattle trade midweek is sparking renewed technical support, allowing for increased market shifts as traders move back into the complex following setting contract lows in early-week trade. | 1) |
Limited interest in cash cattle trade is likely to create underlying concerns of limited movement through the end of the month. With the upcoming holiday weekend limiting processing activity, cash movement may be sluggish the next couple of weeks.
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| 2) |
Following strong midweek gains in live cattle futures, August futures are testing short-term resistance levels set in the middle of June. If prices move above $105.55 per cwt in August futures Thursday, renewed support is likely through the end of the week.
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Sharp market gains Wednesday may create increased volatility, leading to moderate-to-wide market swings through the end of the month. This could limit long-term support.
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| 3) |
Continued active commitments over the last several weeks by noncommercial trades holding long positions continues to focus on underlying long-term support holding through the complex.
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Pork cutout values continue to weaken during late June. The most notable pressure is developing in rib cuts, which is traditionally the key focus of summer pork demand. Rib cuts fell $18.35 per cwt Wednesday afternoon.
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| 4) |
Even with current uncertainty in trade conditions, hog futures are expected to see limited pressure over the near future due to markets already remaining oversold following the aggressive market slide over the last two months. This could spark renewed support at or near $75 per cwt in August contract months during early July..
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Limited follow-through interest in futures trade midweek is creating uncertainty about the ability for continued steady price support to develop at the end of the month. This may spark sharp market swings through the entire complex, leading to additional late-week liquidation.
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