Last week cash cattle trade developed Thursday and Friday with light trade in the South, generally $3 per cwt lower than the previous week. Trade in the North took place Thursday for the most part, with a wide price range, but mostly $5 per cwt lower than the previous week. Despite extremely strong margins by packers remaining, the lackluster interest to trade cattle on a negotiated basis through the end of August quickly offset any hope of cash market support going into the month of September. Cash cattle activity is expected to remain sluggish Tuesday with showlist distribution and inventory taking the main order of business with both sides becoming more active midweek or later. The limited cash cattle trade over the last three weeks will likely add even more cattle to showlists, adding even more concerns on the overall market weakness. Cattle futures are expected mixed early Tuesday morning as traders continue to react to the lower cash cattle trade last week and limited positive news in the beef complex. Even though potential short-covering may develop through early September due to what still remains as an oversold market complex, the lack of positive news in the market and uncertainty about overall beef clearance over the holiday weekend may limit upside momentum during early September.
Lean hog futures are called steady to mostly lower early Tuesday morning as follow-through weakness that continued late last week may add even more pressure to the complex in the near future. Nearby futures still remain well above August lows, which developed over the last two weeks, although the implementation of tariffs that went into place over the weekend are putting more focus on export trade uncertainty and the overall ability to make progress on a trade deal with China in the upcoming September meetings. Continued strong domestic demand is sustaining current price levels with active packer interest in the complex. Cash bids are expected steady to $2 lower with most bids $1 lower. Expected slaughter Tuesday is at 482,000 head.
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Strong beef clearance is expected to have developed over the Labor Day Holiday weekend. This continues to help support additional underlying movement for beef through late summer and early fall.
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Strong cash market losses last week going into the holiday weekend continued to be a hard pill to swallow as lack of stability in futures and cash trade is increasing uncertainty during early September.
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Boxed beef values have continued to hold a majority of the aggressive gains during early August. This should help stimulate additional packer interest, resulting in additional demand for cash cattle trade.
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The holiday-shortened trade week will significantly impact overall cattle slaughter numbers with the lower daily capacity unable to be picked up on Saturday due to already aggressive plant schedules after being idled on Monday.
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October lean hog futures continue to hold a wide price gap over recent market lows. The ability to establish August support levels as seasonal lows is expected to spark additional noncommercial buying interest to step back into the complex.
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Strong underlying pressure late last week in nearby lean hog futures quickly eroded underlying end-of-month buyer support in the complex, so last week's highs may not last.
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There is continued hope for signs of progress of a trade agreement with China. The focus on upcoming trade talks in September continues to be a longshot, but it is the most hope that the hog complex has had for a trade agreement in months.
| 4) |
With new tariffs now in place by both the U.S. and China, there will be more focus on how this will impact not only pork demand and exports over the weeks to come, but also the impact on the overall economy.
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