Cash cattle interest is expected to remain sluggish early Tuesday morning following strong futures market losses early in the week and concern that additional cash market weakness will still develop even if futures trade stabilizes. This was evident with the limited early asking prices that developed Monday. Feeders priced cattle steady to lower than last week's cash cattle markets with the expectation that limit losses in live and feeder cattle markets Monday would have a bearish impact on cash markets. The few cattle that were priced were listed at $112 to $113 live and $180 dressed. Showlists were generally mixed with lighter numbers in the South and slightly higher offerings through parts of the North. At this point, both sides appear to be in no hurry to trade cattle early in the week, which could delay any significant activity until the last half of the week. Futures trade is expected mixed to mostly higher. The strong overnight surge in outside markets has pushed stock market futures sharply higher, and buyer support in most commodity markets that traded through the night. This upward market momentum is expected to spark buyer support through most cattle contracts. The intensity of market support is still uncertain, with limit losses seen Monday, feeder cattle have access to expanded trading limits. Even though limit losses in live cattle developed in August and October futures Monday, the pullback from market limits in April and June futures will keep live cattle futures limited at $3 per cwt Tuesday. Given the volatility of the market, and oversold status over the last two weeks, hitting daily trading limits is not out of the question. Tuesday slaughter is expected near 121,000 head.
Sharp triple-digit losses early in the week across nearby lean hog futures has continued to spark uncertainty about short- and long-term direction in the complex. The fact the lean hog trade has not broken through support levels set in late February is helping to bring some much needed stability to the lean hog complex despite the pressure in outside markets and cattle contracts hitting contract lows. The focus on regaining demand support in China and other areas of China, which have been heavily impacted by African swine fever and coronavirus will continue to help support overall long-term support of the market. Transportation issues will continue to be a challenge in the near future as containing coronavirus on a domestic level seems to be the main priority of the business sector at this point. Cash hog prices are called $1 lower to $1 higher with most bids expected steady to firm. Slaughter Tuesday is expected at 495,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Active gains in outside markets overnight, and Dow Jones Futures posting gains of nearly 1,100 points early Tuesday, is creating hope that the most active liquidation has passed. This could allow for strong buyer support to resume in cattle markets at opening bell.
| 1) | The early week losses in futures trade is pointing to lower cash cattle trade by the end of the week. The concern that packers will continue to leverage futures market weakness in order to gain access to cattle during the next couple of weeks could offset any market rebound that may develop over the coming days. |
| 2) | Boxed beef values have remained stable to firm through the intense pressure in cattle futures over the last week. Wholesale beef values is giving the best indicator of market fundamentals at a time when futures and cash markets have temporarily lost sight of fundamental activity. | 2) | Because nearby live cattle contracts have hit contract lows, with June and August futures falling below $100 per cwt, the market structure remains weak, and will take time and consistent support from outside markets to regain significant and sustained buyer support. |
| 3) |
Lean hog futures have been able to hold recent support levels, indicating firm support through trades who have held contracts over the last month. This is expected to limit further losses as traders look at renewed global demand for pork.
| 3) | Sustained outside market moves will continue to be a major issue in redeveloping active buyer support through lean hog trade over the next couple of weeks. Given that hog futures did not post the same pressure as cattle trade, price recovery may be delayed and subdued over the coming days. |
| 4) | Triple-digit gains developed in pork cutout values Monday. This focus on increased price support for wholesale meat products even while triple-digit losses developed in futures trade helps to put the need for pork supplies in perspective despite outside market pressure. | 4) | Continued long-term concerns of the economic impact of coronavirus in the U.S. and its effect on consumer spending activity could quickly change short and intermediate pork demand. This could limit overall movement to end users, putting more emphasis on pork production within the country. |
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| #completecalfcare |
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