Cash cattle activity remains quiet going into midweek with just a few token asking prices early in the week. Even these asking prices remain vanilla, at $108 in the South and $178 to $180 in the North. Packer interest may slowly develop through the day, but for the most part, it is not expected that active moves will develop until later in the week. The extreme discount between beef values and cash markets that has developed the last two and half weeks should limit additional short-term pressure in cash trade, but boxed beef values have also started to soften, giving back a portion of the overblown premiums, which developed following the Tyson plant fire in Kansas. The U.S and Canadian cattle report released Tuesday afternoon posted generally steady cattle numbers from year-ago levels. Although numbers were slightly lower, it was not statistically significant as percentage levels did not change. This gives a little bit clearer view that the weather conditions and flooding during the spring months did not have a significant statistical impact on overall cattle numbers. Cattle futures are expected mixed in limited early trade, although the underlying weaker tone Tuesday may cause additional pressure as traders continue to test last week lows with October futures still unable to consistently hold prices above $100 per cwt.
Lean hog futures were able to regain most of the early session losses Tuesday afternoon. This is viewed as a positive move, which may spark additional underlying support in the complex. Although prices have quickly shifted away from short-term lows set last week, the concern that continued large hog supplies in the pipeline combined with uncertain export movement will limit the upside of the complex the next couple of months. Technically, nearby lean hog futures appear to be establishing a longer-term trend, but with a more defined sideways trading range between $60 and $67 per cwt. The "will we, or won't we" shifts concerning a trade deal with China will continue to be a major factor in shifting markets back and forth through the rest of the summer, and likely the entire year. Hog supplies increased 3% from year ago as of July 1 in Tuesday's hog inventory report. This is no significant surprise to anyone who has followed the market as the market has expanded over the last year. But the confirmation of increased supplies does bring additional caution given the fact that overall global demand for U.S. pork remains under pressure. Cash bids are expected steady to $1 lower with most bids steady to weak. Expected slaughter Wednesday remains near 481,000 head. Saturday runs are expected at 61,000 head.
| BULL SIDE | BEAR SIDE | ||
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Continued strong beef values should help to spark some underlying support through live cattle and cash markets given the wide gap in price levels currently.
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Strong cash market discounts continue through the entire beef market as traders focus on the wide spread between beef values and cash markets. This will continue to keep the entire cattle market under moderate pressure.
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The trade deal with Japan that is expected to be signed in September cannot be overlooked or dismissed. Even though we sometimes take trade with Japan for granted, the development of this trade agreement would help to solidify continued beef market strength.
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October live cattle continues to consistently push below the $100 per cwt price threshold. This is creating additional market softness, allowing for increased concern of market weakness to carry well into September.
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Lean hog futures bounced off triple-digit losses Tuesday, closing slightly lower in most nearby contracts. Moderate, late day activity indicates firming buyer interest is developing.
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Pork cutout values posted sharp losses Tuesday. Although trade activity remained high with a $27.41 per cwt loss in belly cuts pushing the entire cutout value nearly $5 per cwt lower for the day. This is expected to weaken underlying support in the near future.
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| 4) |
Despite the current trade issues with China, the fact that China will continue to need pork supplies to fill its food chain cannot be understated. Pork prices continue to steadily rise in China as overall production levels in the country are expected to fall through the end of the year, but it is still bullish for global pork markets.
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Hog supplies continue to improve with U.S and Canadian hog inventory increasing 3% from year-ago levels. The U.S. pig crop increased 4% over the last year, with total U.S. hogs at 75.02 million head.
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| #completeherdhealth |
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