Cash cattle trade is expected to remain quiet once again Tuesday morning, although both sides are expected to become more aggressive given the limited movement in negotiated cash cattle trade the last two weeks. The rally in wholesale beef values last week, where choice cuts rallied over $22 per cwt, is expected to stimulate additional buyer support through the week. It is expected that the downside move last week was overly aggressive, which will likely help to stimulate additional upside movement through the week and likely the end of the month. Futures trade is expected mixed in limited early morning activity. Once again feeder cattle trade will remain heavily influenced by grain trade. Although there still remains potential downside moves in the corn market, the uncertainty of current corn crop status and how this will relate to overall total production levels will be a major focus in the next few weeks. Even though the cattle complex remains oversold, the inability to find traders willing to actively jump into this market at this point will likely keep prices from aggressively breaking to the upside in the near future.
Follow-through buying is expected to develop through lean hog trade with increased focus on early week gains. Even though firm underlying support may continue to develop through lean hog trade in the near future, upside market potential remains limited given bearish trade news and China showing no active interest in buying pork. Even though the production losses of pork in China and other Asian regions is significantly reduced, the intentional move not to significantly increase purchases from the U.S. is expected to limit any strong underlying support in the near future. October futures set long-term lows of $62 per cwt last Friday. The ability to hold price levels above these lows will be essential in redeveloping market support. Cash bids are expected steady to $1 lower with most bids steady. Expected slaughter Tuesday is at 477,000 head.
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Boxed beef prices continue to climb, sparking aggressive profit margins for plants. This should continue to create incentives at all plants to push the envelope in order to maximize beef output and clear additional market-ready cattle.
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The underlying bearish tone in live cattle trade is limiting buyers from moving into the market even though most would agree that the market is oversold. The unwillingness to take the first step could limit upside market potential in the near future.
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Continued early week losses in grain trade puts the focus on lower production costs. This is expected to be most evident in feeder cattle trade, which is regaining market footing following last week's losses.
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Intra-session price swings in live cattle and feeder cattle increased last week with cattle markets unable to hold early gains as initial support and buy orders seem to evaporate through the last hour of trade.
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Triple-digit gains in most lean hog futures Monday is putting distance away from last week's liquidation. If the complex remains oversold, it will solidify buyer interest the next couple of weeks.
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The inability to successfully string together consecutive gains in nearby lean hog futures is causing underlying concern that the market may continue to widely shift higher and lower over the next week without being able to break away from the bearish tone holding the complex near market lows.
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The ability to stabilize pork cutout values through the week will help to spark additional underlying fundamental support in the complex. This is expected to create additional near-term momentum in futures and cash trade.
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With most of the emphasis on support in wholesale beef values, pork values have continued to show limited life. Moderate-to-strong losses in ham and belly cuts early in the week are causing even more caution through the entire complex due to the fear that pork values may show little improvement in the near future.
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| #completeherdhealth |
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