Cash cattle trade remains quiet heading into midweek. The focus on moderate-to-strong support futures trade is creating the hope and expectation of more stability in cash cattle trade through early September, but the entire market remains generally uncertain given the passing of the Labor Day holiday and still strong cattle supplies looming over the upcoming months. Just a few cattle sold in Iowa late Tuesday, at $170 per cwt dressed basis. This is not enough trade to accurately determine a market trend in any area, but the early trade is a little surprising given the holiday on Monday. Bids and asking prices are expected to remain generally sluggish through Wednesday morning, although some packer improvement may happen as the day continues. This may spark some additional underlying support through the rest of the week, although the hurricane along the East Coast is also expected to create uncertainty about overall beef product movement in many of the areas affected by the storms. Futures trade is expected to be mixed-to-moderately higher with follow-through support developing across the cattle complex. Although live cattle futures pulled back from session highs, the ability to hold positive price moves going into the close is encouraging and likely to stimulate follow-through buyer support.
Sharp gains quickly and aggressively moved into lean hog futures following the long holiday weekend. Limit gains of $3 per cwt developed in October futures, moving prices to $66.52 per cwt. This is the middle of August, and more importantly, further distant price levels from what is expected to be season lows on Aug. 23. Expanded trading limits will be in place through the entire session Wednesday, allowing for increased market volatility. This may spark some additional follow-through support, although it is likely that light-to-moderate position-taking may attempt to develop early in the session as trades try to take advantage of the upward market shift during early September. Despite the support in futures trade and recent gains in pork cutout values, cash markets are still expected to remain generally weak the next couple of days. Cash bids are expected to be steady to $2 lower with most bids steady to weak. Expected slaughter Wednesday is at 484,000 head.
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Sharp triple-digit gains in feeder cattle futures is helping to stimulate additional underlying support. This is further moving away from August lows, and attempting to break away from the short-term support in late August at $132 per cwt.
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Cash cattle prices still remain under significant pressure despite the elevated boxed beef values. Continued aggressive packer margins are showing little support to cash markets at this point.
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Strong premiums placed in early 2020 contracts through live cattle futures is pointing to improved market positions as traders focus on tighter supplies the next six months. This should help to not only improve live cattle prices, but spark additional long-term interest through beef values.
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Limited support in early week live cattle trade is causing additional concern in the complex. This is still keeping spot October futures under $99 per cwt, sparking additional concern about the ability to break out of the weaker market range.
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Sharp gains in nearby lean hog futures has quickly and aggressively rekindled market support as traders focus on building on the recent market lows, bringing additional commercial and noncommercial support back into the oversold market.
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As seen in the past two months, wide market swings add instability to the entire complex. Although the move higher was encouraged Tuesday, the potential for traders to backpedal early week gains is a significant threat in the volatile lean hog complex.
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Limited resistance is seen above current lean hog market prices, allowing the potential to spark active gains over the near future. A move above $68 per cwt in October futures could create strong technical support as prices may develop little resistance to post additional strong gains through early September.
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Hurricane threats along the East Coast continue to create underlying concern for pork production and processing capacity in the eastern half of the U.S. Although current hurricane paths are not expected to make an immediate impact to major hog production areas, this could quickly change, leaving markets more volatile.
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