Mixed trade is expected in live cattle and feeder cattle trade Tuesday as traders focus on previous market support driven by the adjustments in grain markets. Tuesday markets over the past several weeks have remained volatile, which could lead to additional market shifts, especially in front of the holiday Thursday. The triple-digit gains in feeder cattle have created only limited support in live cattle trade with firming market support developing in early July, but unable to spark aggressive interest due to questions about summer beef demand growth. Cash cattle trade interest remains quiet with bids and asking prices still hard to pin down early Tuesday morning. It is likely that both sides will become more active through the day in a desire to wrap up any needed cash business by the end of the day Wednesday. With markets closed and packers dark Thursday for Fourth of July, both sides will want to get as much business done early in the week as possible in order to have a four-day weekend.
Mixed trade is expected Tuesday following the sharp shift higher Monday. With all active nearby contracts holding gains of $2 per cwt, there will be increased focus on follow-through buying support as traders try to assess any long-term support as trade talks are expected to continue in the next several weeks or months with China. The sharp one-day rally Monday is also expected to bring active selling pressure due in part to lightly traded holiday volume that is already starting. Even though market volatility may develop over the next week, the firm market rally over the last week and potential fundamental support possible in the upcoming weeks and months is likely to move away from long-term lows set during late June. This may spark additional underlying commercial support with traders trying to reestablish a firm market range. Cash trade is called steady to $2 lower Tuesday morning with most bids $1 lower. Expected slaughter Tuesday is at 477,000 head. Saturday runs are expected near 191,000 head.
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The recent corn market slide is sparking additional support in cattle futures in early July. This not only is reducing short- and long-term feed costs for producers but is sparking additional commercial and noncommercial support to reenter the market.
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Boxed beef values struggled to show significant improvement last week. This is creating concern that even if there is active product movement during the holiday weekend, active price support may be limited.
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Holiday beef demand is expected to remain firm, which should help to stimulate additional underlying support in futures and cash trade in early July.
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Trade volume is expected to remain sluggish through the rest of the week, creating the potential for late-week position-taking the next couple of days, potentially eroding early-week support in feeder cattle trade.
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August lean hog futures have rallied $4.50 per cwt in the last week, focusing on potential trade relations with China, which could significantly improve exports if a trade deal is reached. The expectation of future buying activity even with current tariff levels has pushed prices off long-term lows.
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Despite the strong rally in lean hog futures trade, pork values have struggled to remain stable. The potential for choppy but unsupportive moves in pork cutout values through the end of the week may limit the upside momentum during early July.
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Technical buyer support has quickly moved into the complex the last several trading sessions. This may add increased underlying commercial support going into the Fourth of July holiday.
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Despite optimism about the potential of an agreement to continue trade talks with China, the lack of a trade agreement, and continued fundamental trade differences between the two countries remains. This is expected to create uncertainty in the next couple of weeks, limiting further market gains.
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