Packer interest is expected to improve Thursday with additional bids developing across all areas. The initial weak bids on Wednesday at $109 live basis may be the starting point once again, although asking prices of $113 per cwt live and $186 and higher dressed are not expected to budge at this point, leaving a wide cavern between offers and asking prices. It would not be surprising if at least light-to-moderate trade developed through the second half of the day, although a portion of trade may be delayed until Friday as both sides try to assess longer-term direction in futures and wholesale beef values. Futures trade is expected mixed in a narrow trading range. The light but firm buyer support through the week has allowed renewed bullishness to develop, although traders seem reluctant to continue to push prices higher after breaking through May highs. This is causing increased focus on upcoming fall and winter beef demand, which is expected firm, but uncertain if domestic movement can push prices to the next level.
Lean hog futures are still trying to find footing after surging higher the last two weeks. August futures continue to lead the complex higher with prices at $86.55 per cwt, sparking increased focus on expanding renewed gains off of summer lows. Although there is uncertainty about trade deal developments, strong underlying demand in domestic markets as well as improved packer margins, is helping to firm buyer activity across futures trade. The pullback Wednesday in several nearby contracts focused more on contract adjustments following recent gains, and less on the overall direction of the market. Trade is expected mixed to mostly higher with follow-through buying likely to be scattered as increased volume develops Thursday morning. Cash bids are expected $1 to $2 per cwt higher with most bids 50 cents higher. Expected slaughter Thursday is at 475,000 head. Saturday runs are expected at 9,000 head.
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Continued support moving through feeder cattle trade midweek is helping to spark additional underlying support across the entire cattle trade. This is likely to bring additional buyer interest to the complex as volume increases mid to late morning Thursday.
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Boxed beef values have struggled to show significant market support over the last week. This is creating some doubt of long-term support in all cattle trade.
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Gains in live cattle trade have been consistent but limited through the last week. This is creating some much needed stability across the cattle complex, and taking much of the volatility out of the market through mid-July. This firm move higher could help build long-term strength.
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The narrow gains in live cattle trade has helped to build underling support, but without active follow-through buyer interest moving into the market, prices may plateau at current levels, allowing markets to hover in a narrow but sideways trading range during late summer.
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Strong gains in cash and wholesale pork prices flooded the complex, helping to add fundamental support.
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Lean hog futures have the potential to post aggressive market losses following the unchecked market rally the past couple of weeks. At this point, a move lower would be considered a market correction, and not a change in the trend of the market, but it may limit further gains.
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The plan to send trade negotiators to China at the end of the month is creating additional hope that a trade deal will be in the works sooner than later. This will likely add additional support to hog markets.
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Continued concerns of long-term export demand continue to weigh heavy on the hog complex. Even though trade talks are in the works, the potential for a deal with China could be a long ways off based on fundamental differences in business practices between the two countries, which could limit progress once again.
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