Cash cattle activity is expected to remain muted through most of the morning with bids and asking prices still likely to be hard to pin down at this point of the week. Given the light trade last week, overall offerings are generally larger but is not likely to cause packers to become overly aggressive, at least early in the week. Pressure in futures trade Monday and upcoming end-of-the-month positioning is expected to create additional hesitancy on both sides to step into the market on Tuesday. Although midweek trade is still a possibility, it is likely that trade will be pushed off until sometime Thursday or Friday. This could allow for another round of wide gaps between asking prices and bids once both sides actually step into the market during the week. Futures trade is expected to remain weak although a combination of follow-through pressure and short-covering is likely to develop Tuesday. The tone of the live cattle trade remains firm as traders focus on nearby contracts near short-term resistance levels, helping to rekindle the bullish overall tone of the market through the end of the month.
Sharp losses have quickly redeveloped in lean hog trade as limited buyer interest Monday allowed for a wide market shift as October contracts closed limit lower. This not only adds to the overall weakness of the market through the end of the month, but also expands trading limits Tuesday with lean hog trade able to move $4.50 per cwt in either direction without restrictions. The wider market shift could add even more volatility through the end of July. Although the weaker tone in the complex Monday would point to follow-through pressure early Tuesday, selling interest is expected to thin out significantly at current levels, allowing buyers to move back into the complex on Tuesday. Cash bids are expected $1 to $2 per cwt higher with most bids $1 higher. Expected slaughter Tuesday is at 473,000 head.
| BULL SIDE | BEAR SIDE | ||
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October live cattle futures continue to flirt with $110 per cwt price levels. A close above these levels through the end of the month would break through July highs, and post two-month highs, sparking potential renewed technical support during the month of August.
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Active pressure in feeder cattle trade has caused underlying concerns of additional end-of-the-month support through the entire cattle complex. This may add even more pressure through the next two days.
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| 2) |
Strong underlying support moved into boxed beef values early in the week. This is expected to help stimulate additional underlying confidence that additional demand support is developing in the wholesale beef complex through the last half of summer.
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If October live cattle futures cannot move above $110 per cwt through the end of the week, it will be a significant blow to further short-term support. Without moving through this resistance level, a wide but well defined sideways trend is being established.
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| 3) |
Trade talks with China are getting underway, creating hope and expectations that there will be light-to-moderate progress by the end of the week. This could help to rebuild market confidence that trade relations are improving, even if it may be a long process.
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Sharp triple-digit losses early in the week has started to erode buyer confidence in lean hog trade. October lean hog trade has fallen $5.35 per cwt in the last week, potentially setting seasonal highs, which could spark follow-through pressure at the end of the month.
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| 4) |
Cash hog prices continue to rally higher, with increased buyer support seen by packers in order to secure needed procurement numbers. The higher cash market support may continue to stimulate active support as packers have yet to significantly curb processing speeds at the higher prices.
| 4) |
The strong underlying support in wholesale pork prices appears to be eroding with pork cutout values softening Monday. If further moderate-to-strong pressure develops in primal cuts through the next few days, additional wide market liquidation may develop in futures trade.
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