Limited development in cash cattle trade through the early part of the week is expected to create sluggish overall interest from both sides Wednesday morning. Bids and asking prices are likely to be few and far between through the first part of the day, although packer interest is expected to improve slightly as the day continues. Although there is likely to be some emphasis on trading cattle before the end of the month, the wide gap between asking prices and bids will limit overall trade activity at this point. Although there were a few bids at $183 per cwt on Tuesday in the North, interest in the South remained quiet, which is the opposite of what is typical through the first half of the week. Futures trade is expected mixed midweek with live cattle futures expected to hover in a narrow trading range through most of the morning, while the potential for additional underlying gains in feeder cattle will depend more on the direction of grain trade rather than moves in live cattle trade at the end of July.
Continued pressure is expected to develop in lean hog trade as a bearish tone has swept across the entire complex. Over the last week, October lean hog futures have tumbled nearly $8 per cwt, creating not only a bearish trend, but quickly distancing price levels from late-summer highs. Although nearby contracts still remain well above support levels due to the aggressive buyer support that flooded into the complex, the potential to find support over the near future remains uncertain given the lack of optimism surrounding export trade and continued strong pork production through the country. Fundamentally, traders should find support at current levels, but the aggressive liquidation the last few days has allowed markets to move lower based primarily on trade momentum as buyers have been unwilling to step into the falling market. This is likely to keep market volatility high in the near future and add to increased wide price swings during early August. Cash bids are expected $1 to $2 per cwt higher with most bids $1 higher. Expected slaughter Wednesday is at 475,000 head. Saturday runs are expected at 34,000 head.
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Active gains in wholesale beef values developed during early-week trade. This is helping to regain underlying fundamental support as traders look for firming end-of-summer beef demand to help stabilize market activity.
| 1) |
The turn lower Tuesday in nearby live cattle futures could indicate a double top developing in futures charts. The potential that this may have set the seasonal high near $110 per cwt in October futures could limit underlying technical support the next few weeks.
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| 2) |
Sharp gains in feeder cattle futures Tuesday broke away from the generally weaker trend across the complex. Feeder cattle traders turned the focus back to eroding grain markets, which is softening the blow of higher feed costs.
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Growing concern of long-term trade relations with many of our trading partners continues to be an underlying topic as tensions seem to be generally high with most trade relationships, not just China. Concerns of any potential upcoming changes in trade policy with Japan is currently a major concern to the beef industry.
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Aggressive gains developed in wholesale pork cutout values Tuesday afternoon with strong underlying support developing in ham and belly cuts. This is expected to help support overall fundamental market shifts once the widespread and emotional liquidation subsides in lean hog futures.
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Active liquidation continues through lean hog futures trade, with October futures falling nearly $9 per cwt over the last week. This is likely to add even more concern in the entire complex.
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The fact that trade talks with China are currently underway should not be overlooked. Even though short-term results are not expected, the fact that the two sides are currently talking again is a step in the right direction and should move the process along.
| 4) |
Overall long-term demand for pork continues to be a major concern given the still strong supply levels, and lack of confidence that active export demand will be revived in the near future.
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| #completeherdhealth |
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