Negotiated cash cattle trade is slow to develop through the week with just a few deals reported in the North at $180 to $185 per cwt. The limited activity is not enough to establish a good market trend, although increased interest is expected as the week continues. Packer interest is likely to improve through the morning, but it may continue to show limited market movement until Thursday or Friday in most areas. Futures trade is expected to be mixed early Wednesday morning with a combination of follow-through selling and short-covering moving into the complex, although initial volume should remain subdued through most of the morning. This could add increased underlying stability if buyers are able to establish a strong market hold over the next couple of days. Outside market direction will continue to be a major driver of price direction in live cattle and feeder cattle trade during the rest of the week.
Sharp continued losses moving into lean hog futures Tuesday sparked additional underlying weakness through the entire complex. October futures led the complex lower with a $2.85 per cwt loss. Although the market remains firmly above contract lows at this point, the long-term weakness in spot month contracts continues to cause concern that follow-through pressure will develop over the upcoming days and weeks. The hog complex remains oversold, and is due for a strong upside market correction, but given the focus on the ongoing trade war with China and uncertainty of moving our pork into export markets has caused significant weakness in the entire complex. Cash bids are expected $1 to $3 lower with most bids $1 to $2 lower. Expected slaughter Wednesday is at 476,000 head. Saturday runs are expected near 44,000 head.
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Firm underlying support is moving into wholesale beef cutout values early in the week with the potential for increased fundamental support developing in the next few weeks. This could help to stabilize overall market support.
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Strong underlying pressure in live cattle trade continues with October futures leading the complex lower, as traders not only focus on the movements in live cattle trade, but widespread livestock losses over the last week.
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Given the $3 per cwt market slide the last two weeks, the potential for an upside market correction is becoming more likely. This could help to spark moderate-to-strong buyer activity moving into the market through the end of the week.
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Cash cattle trade has been slow to develop as packers continue to check weekly needs given the overall lack of support in futures trade. This may continue to cap the upside potential of cash cattle markets through the week given the bearish moves in futures trade.
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Downside market risk is becoming more limited as prices move below $65 per cwt in fourth quarter contracts. This could help to spark moderate-to-strong buyer support quickly in the next few days as traders view the complex oversold and ready for a market correction.
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The inability to hold onto early week gains in nearby lean hog futures has dealt another blow to the lean hog complex. This could continue to show overall market weakness during the week as traders continue to test long-term lows in nearby and deferred contract months.
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Firm gains in wholesale pork values is helping to limit overall bearish outlook of the pork market during early August. Domestic demand remains firm with increased overall movement expected to develop in the near future.
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Moderate-to-sharp losses in cash hog values has put increased pressure on the market as packers continue to source needed procurements at lower prices given the steep losses in futures trade and availability of market ready hogs.
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