The lion's share of cash cattle trade has been delayed until Friday since limited packer interest showed up just in the last couple of days. So far, most feeders are unwilling to accept current bids that are steady-to-firm with last week's price levels. Given the recent surge in beef values and this week's slow but steady growth in futures trade, it is expected that prices will show improvement unless overall futures markets would happen to fall apart through the day. Futures trade is expected to remain generally firm as follow-through support is moving back into the complex. Traders will get their first chance to trade Thursday's Cold Storage report, which reported 455 million pounds of beef in warehouses. This is a 12% jump from June levels but is 6% under year-ago levels. The indication that year-over-year clearance remains good, with the larger amount of cattle inventory through the year remaining positive, but traders are likely to be uneasy at the size of month-over-month growth, and what this may indicate for short-term beef demand. It is expected that traders will not spend much time on the Cold Storage report with the Cattle on Feed report released after trade closes Friday. This will likely cause some additional market adjustments ahead of the report.
Lean hog futures continue to erode through late week trade with increased pressure developing in cash and pork cutout values. The underlying weakness in the market has an opportunity to break through support levels before the end of the week in nearby futures. This could add more widespread pressure through the weak lean hog market structure. The potential for end-of-the-week buying to step into the complex is developing given the oversold status of the complex and limited additional direction in the market. But traders still face a generally bearish market structure given the trade uncertainty and overall availability of hogs and pork in the system. Cash bids are expected steady to $2 lower with most bids $1 lower. Expected slaughter Friday is at 471,000 head. Saturday runs are expected at 128,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Beef in storage fell 6% from year-ago levels. This is expected to spark some long-term overall support as traders focus on the big picture of continued market moves through the last year even though active production continues to develop.
| 1) |
Beef inventory levels surged higher in July from month-ago levels. This increase comes as a general surprise, but this will help to solidify the expected aggressive marketing levels estimated in the afternoon Cattle on Feed report.
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| 2) |
Traders are looking for steady-to-higher cash cattle trade through the day. Limited moves early in the week have set up cash markets for a showdown Friday as feeders feel like their backs are against the wall, and they are unlikely to be in a mood to move more than their share at the end of the week to get any deals done.
| 2) |
Choice boxed beef values tumbled for the first time in nearly two weeks with values falling $2.46 per cwt. This could indicate additional weakness starting to develop in wholesale beef values over the aggressive two-week rally.
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| 3) |
Total pork supplies fell over the last month, reporting a 97% level from June levels. Rib and belly clearance led the market based on seasonal support during the month of July.
| 3) |
Lean hog futures continue to hover just above long-term lows set last week. A move below $62 per cwt in spot October contracts could spark renewed liquidation in the complex.
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| 4) |
Lean hog futures remain oversold, given the inability to hang onto early week support. This could spark some end-of-the-week buyer support in the complex.
| 4) |
Pork values continue to remain weak, which added to the concern that no sales were reported to China in this week's export sales report. Underlying fundamental weakness is still holding in the entire hog complex.
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