The lion's share of cash cattle trade still needs to develop in all areas Friday. Both sides are sticking to their guns this week and with limited market development in cash cattle trade, this could set up a late-week showdown that could set the tone for cash cattle markets through the end of the month. Packers continue to try to take advantage of recent pressure in futures trade and lack of strong support in beef values through the last two weeks. Feeders on the other hand, feel that the market tide is shifting, and are unwilling to settle into the steady-to-weaker market trend seen the past few weeks. This could lead to late day trade since there is a wide gap between asking prices and expected bids Friday morning. Cattle futures are expected to remain mixed to mostly higher early Friday morning with moderate-to-firm follow-through interest trickling into what is likely to be a lightly traded market through most of the day. The potential for limited losses is developing as traders not only take advantage of position-squaring opportunities, but feeder cattle futures may be heavily influenced by grain market trade at the end of the week.
Light-to-moderate follow-through support is expected to move into lean hog trade. The firm move higher over the last two trading sessions is likely to spark some additional underlying support through the complex as traders move away from long-term lows. Thursday was the first day since July 23, where gains have been posted for two consecutive trading days. The ability to break out of the back-and-forth price pattern that lean hog futures have been stuck in will be huge in not only moving prices away from long-term lows, but also developing what could be a strong market rally. The lean hog complex continues to be viewed as oversold, allowing potential swift market shifts higher despite the ongoing trade issues and uncertainty of any near-term resolution. Cash bids are expected steady to $2 lower with most bids $1 lower. Expected slaughter Friday is at 452,000 head. Saturday runs are expected near 50,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Light-to-moderate gains developing in nearby live cattle futures have helped to stimulate additional underlying support in the complex. This has moved prices off of month-long lows, stimulating expectations of additional end-of-the-week gains.
| 1) |
Cash cattle trade remains limited with packers digging in their heels at the end of the week, unwilling to aggressively offer additional money at this point. This may limit follow-through support in the complex the next couple of weeks.
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| 2) |
Feeder cattle futures have temporarily broken away from moves in corn and grain trade, with buyers moving back into the complex as commercial buying interest is starting to redevelop based on firming beef market fundamentals, and not just production cost concerns.
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Increased uncertainty will be seen in grain markets heading into the USDA crop report early next week. This will include the second planting survey, and will give a better understanding of corn acres planted. The report has a potential to significantly shift feed prices through the end of the year, also heavily impacting feeder cattle trade.
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| 3) |
Strong triple-digit gains have flooded into nearby futures each of the last two sessions. The ability to close above recent lows at the end of the week would help spark additional long-term support.
| 3) |
Weakness in cash hog values continues as packers not only have successfully pushed cash values lower over the last week, but also have managed to reduce overall procurement levels. This could further weaken cash hog trade over the near future.
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| 4) |
Lean hog futures continue to remain oversold following the $17 per cwt market slide over the last month. The ability to string together three positive daily moves at the end of the week would create additional market support early next week.
| 4) |
Despite the recent shift higher, the underlying tone of the market still remains fragile and generally weak. This could limit end-of-the-week support, as overall market fundamentals remain generally bearish.
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