Cash cattle trade continues to remain undeveloped going into the midweek session with both sides looking for additional direction. Given the aggressive rally in beef values over the last 10 days, feedlot managers are even more unwilling to back away from initial asking prices. Packers continue to focus on the reduced packing capacity due to Tyson's plant shutdown in Kansas, but if the weekend schedules increase, most if not all of the production losses likely will be made up. Packer bids are expected to become more evident through the day, although at this point, trade may not develop until later in the week, potentially after Friday's Cattle on Feed report. Futures trade is expected mixed to mostly higher with follow-through gains developing after the positive close Tuesday afternoon. Although the market still remains under the shadows of the bearish market shift last week, traders are starting to break away from market lows, with additional potential to push prices moderately higher in the near future.
With two consecutive triple-digit gains, the lean hog futures has the potential to spark additional underlying support and move further away from long-term support levels. Markets remain oversold, leaving additional room for prices to roam before hitting significant resistance levels, which should spark morning buyer support. The uncertainty comes in knowing just how deep buyer interest remains at these current price levels. Continued softness in pork values has added even more uncertainty to the complex, and will likely limit the consistency of market gains through the end of the week. The ability for October futures to move above $66.77 per cwt through the end of the week would likely stimulate additional technical buyer interest. Cash bids are expected steady to $1 lower with most bids steady. Expected slaughter Wednesday is at 477,000 head. Saturday runs are expected at 128,000 head.
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Continued surges in boxed beef values over the last 10 days has created incredible packer margins. This is expected to help bring long-term support to the complex and help sustain underlying futures support.
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Despite the recent shift higher in futures trade, live cattle futures still remain near long-term support. The underlying market tone still remains generally weak even though aggressive gains have developed in beef values.
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| 2) |
Live cattle futures have broken away from the shackles holding the complex lower over the last week. With triple-digit gains developing Tuesday for the first time since early July, the focus may finally be moving away from long-term pressure.
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Cash cattle prices continue to be depressed following the aggressive losses that developed last week. The concern is that packer need and desire to source additional cattle will be limited due to the idled Kansas packing plant.
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Nearby lean hog futures have posted strong triple-digit gains over the past two trading sessions. Although it is premature to call that a trend, the break away from long-term lows is sparking renewed market optimism.
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Pork cutout values have continued to erode the last few days. This is sparking increased underlying pressure despite the recent push higher in futures trade.
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Aggressive packer needs continue to focus on gaining access to additional market-ready hogs. This will limit the ability for packers to reduce cash prices, despite the recent pressure in pork values.
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The potential for wide market swings developing through the end of the week could disrupt the short-term market rally seen in the last two days. The inability to draw additional buyers to the table could cause active losses, making long-term lows possible.
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