Limited interest has yet to be seen in cash cattle markets with feeders and packers still hesitant to place their foot on base given the uncertainty of direction in futures and wholesale beef values. Although it is still expected that light-to-moderate cash trade will be needed by the end of the week, it could be Wednesday or later before feeders put firm prices on cattle for the week, and bids could be delayed until the last half of the week. The lack of aggressive selling pressure in futures trade last week is helping cash participants not panic, but feeders seem content to try to dig prices out of last week's price depression in order to focus on a more fundamentally balanced market level. Futures trade is expected mixed in limited early trade following the moderate-to-strong price pressure developing late Tuesday. Traders are focusing more on the inability to hold strong early gains, which indicates that initial support Tuesday was overextended, but the strong push lower in the stock market had a lot to do with the change in cattle market mentality. The Dow Jones went from a triple-digit gain to a triple-digit loss by the end of the day Tuesday as renewed concerns about how coronavirus will affect the economy and overall consumer demand for most products. This is expected to keep live cattle and feeder cattle trade mixed in early trade, and once again dependent on the movement in outside markets. Wednesday slaughter is expected near 121,000 head.
Moderate-to-firm support on Tuesday is expected to create a firm undertone in the entire lean hog complex as traders focus on the potential that China may be getting back to a more normal pattern through the upcoming weeks. This may help to stimulate the much-expected boost in pork demand through the spring and summer months, although transportation issues may start to be one of the biggest challenges as backlogs continue to develop due to coronavirus issues. The most aggressive support in lean hog futures was in the summer and fall contract months, which is expected to bring about increased underlying support as traders look forward to more long-term demand support in domestic and global markets. The lean hog futures complex has not been hit nearly as hard as other markets over the last week for the sole reason that most of the aggressive losses surrounding coronavirus were seen in late January based on the impact in China. With the pork market putting so much emphasis on China and its need for pork, this has helped to limit the additional risks to pork prices due to domestic demand still remaining strong. Cash hog prices are called $1 lower to $1 higher with most bids expected steady. Slaughter Wednesday is expected at 495,000 head. Saturday runs are expected at 197,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Wholesale beef values still continue to show underlying support through the week despite the late day pullback in futures trade Tuesday. The lack of aggressive beef market pressure while live cattle futures have tumbled lower still indicates that sharp changes in consumer buying patterns have not been seen.
| 1) | Strong market pressure in feeder cattle trade quickly changed the course of cattle futures Tuesday. This market reversal brought traders back to the reality that coronavirus issues are not yet behind us and more market uncertainty will be seen. |
| 2) | Spot month April live cattle trade still remains nearly $3 per cwt above support levels established last week. Without aggressive follow-through liquidation or new domestic outbreak information in the near future, buyers are likely to move back into the market despite Tuesday's losses. This could help to regain commercial buyer interest through the end of the week. | 2) | Cash cattle markets remain weak with limited momentum to regain lost ground last week. The inability for futures trade to hold early week gains and continue to shift higher could leave even more uncertainty when it comes to cash business through the end of the week. |
| 3) |
Triple-digit gains have held in lean hog trade Tuesday despite a 735 point loss in the Dow Jones Index and weakness in cattle trade. This is pointing to renewed long-term expectations that buyer interest will redevelop in China over the coming weeks and months, helping to solidify pork market support.
| 3) | Pork cutout values failed to hold early week support. This is creating questions of sustaining current wholesale and retail prices for pork through the spring and summer months. |
| 4) | Open interest in lean hog futures is starting to rebound as traders focus on potential short- and long-term support levels over the past month holding and creating additional buyer support through the month of March. | 4) | Strong pork production will continue to limit the upside potential of the lean hog futures complex in the near term. Until significant changes are seen in export sales and deliveries, especially to China, it is likely that lean hog prices will remain stuck in a sideways trend near the bottom of the current trading range. |
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| #completecalfcare |
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