Cash cattle market activity remains at a standstill early Tuesday morning, but this is not surprising given the limited early-week activity and bearish market shifts in futures trade. Asking prices and bids are undeveloped at this point, and likely may not be active until midweek or later. It is expected that both cattle feeders and packers will desire to wait until some of the dust settles surrounding the futures trade before actively entering the market. Late-week trade is not unlikely given the overall volatility in the entire complex. Futures trade is expected mixed, although a strong bearish tone continues to hold over the complex following limit losses in live cattle and feeder cattle trade Monday. The limit losses Monday will allow for expanded trading limits in all cattle markets, sparking increased potential for wide technical shifts through the upcoming days. Although futures trade is posting three-month lows, the pressure in the market during 2019, still has prices far from setting long-term support levels. But the moves lower the last two weeks, have moved prices away from the top end of the trading range. This may create some significant market boundaries through the spring months, potentially locking live cattle and feeder cattle within a wide sideways trading range in the upcoming months. Moderate short-covering attempts are likely early Tuesday morning as traders try to take advantage of limited early volume, but the underlying tone of the market is expected to remain generally weak. Tuesday slaughter runs are expected near 122,000 head.
Limit losses in April and May lean hog futures trade Monday have allowed for expanded trading limits of $4.50 per cwt in all lean hog futures contracts Tuesday. This underlying pressure across the complex followed the general market pressure in most markets based on concern and fear of coronavirus in China and other countries around the world. The fears that this could follow the trend of the SARS outbreak in 2003 has many not only cautious but extremely concerned. With the coronavirus impacting the Lunar New Year celebrations in China, increased impact to overall pork demand is also expected. It is uncertain at this point how much overall impact this will have on short- and long-term China imports of meat products, but the fact that African swine fever continues to remain a major issue and will continue to limit pork production in the country is raising increased questions. Trade focus will continue to look for increased overall export growth, there still remain questions of how quickly pork exports to China will ramp up. How much of this expected demand growth will be a direct result of the trade deal, and how much will be normal buying needs as other trade partners production levels are being maxed out still cannot be answered. Cash hog prices are called $1 lower to 0.50 higher with most bids expected steady to 50 cents lower. Slaughter Tuesday is expected at 495,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Packers enter the week with a need to aggressively source market ready cattle in order to meet current market commitments. This is expected to still allow moderate-to-strong support to cash cattle prices as feeders try to push cash cattle prices higher with elevated early asking prices through the week. | 1) | Limit losses in live cattle and feeder cattle futures Monday will allow expanded trade limits in all cattle futures. This may spark continued widespread liquidation through the complex during early week trade, causing increased long-term pressure through the market. |
| 2) | Strong underlying demand support for beef continues in domestic and export markets despite concerns that additional growth may be stunted by coronavirus in China and other parts of the world. | 2) | Growing focus on longer-term supply growth in the last half of the year is expected to create a wider price spread between spot-month live cattle contracts and summer contract prices. August futures currently hold a $11 per cwt discount to spot futures, which is expected to grow through the upcoming weeks. |
| 3) | Expectations are that export trade to China will continue to increase over the upcoming weeks and months based on the trade agreement buying developing, which may help to offset most recent concerns of supply growth. | 3) | Lack of support in pork cutout values early in the week is adding to the underlying weakness through the entire lean hog complex. This could add increased fundamental bearishness to the entire complex. |
| 4) | Summer lean hog contracts continue to hold a strong premium to spot-month futures. This move higher not only supports traditional seasonal price shifts but is also focused on the expectation that increased trade will likely develop through the rest of 2020. | 4) | Nearby August futures are testing long term support levels of $69.90 per cwt set during early August. A move below this level during the week would likely spark additional aggressive market liquidation in commercial and noncommercial traders. |
 |
| #completecalfcare |
No comments:
Post a Comment