Live cattle continue to struggle both in the country as well as on the board. It is difficult to determine if futures are leading cash lower or if cash weakness is pulling futures lower. The market is firmly in a bearish grip with new lows in futures set Wednesday since the highs of late last year. The market may be feeding on itself with weaker futures prompting packers to lower bids. With lower cash, traders continue to sell into the market. Futures are oversold, but it may remain that way for a time based on the movement of underlying cash. Cash cattle traded in the South Wednesday $1.00 to $2.00 lower than the previous day, which was already lower than last week. Cutouts are not helping with prices lower again Wednesday. Hogs continued to struggle, posting another lower low for the week. Technically, hog price charts look more promising than cattle charts. However, there are a lot of hogs coming to the market and will be coming to the market with product needing to find a home.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Technically, the cattle market is oversold, which could trigger short-covering. Fundamentally, lower prices should stimulate demand.
| 1) | Cash cattle trading at ever weaker prices will keep packers holding back as feedlots are willing sellers at reduced prices. |
| 2) |
Cattle charts have a gap remaining around $5.00 higher than current levels. Chart gaps are generally back filled before the end of the contract. February may be the exception due to time remaining, the later contracts have a strong possibility of closing the price gap.
| 2) | There are concerns the short-term demand will remain sluggish. On top of that, there is anticipation of heavy supplies into the second quarter of the year. |
| 3) |
Pork prices in China are high with further increases possible. There is a strong possibility increased demand may come to our shores as the start of numerous slaughtering plants have been delayed due to coronavirus.
| 3) |
Demand for pork from China remains elusive, keeping the market on the defensive.
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| 4) | Pork cutouts increased slightly, which could indicate lower prices have found value, spurring greater consumer demand. | 4) |
Hog slaughter continues to run above year-ago levels, leaving packers comfortable as they see readily available supplies.
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| #completecalfcare |
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