Cash cattle markets remain quiet moving into midweek, with both sides looking for more than one-day price shifts to base this week's cash cattle trade on. The sharp back and forth moves during the week in futures trade may leave most activity until the last half of the week. Asking prices are expected to remain near $112 to $113 live and $180 and higher dressed, but bids could remain far and few between through the first half of the day. More focus will be placed on the direction of beef values and futures trade the next couple of days, as both sides appear willing to wait for a little more stability before becoming more active in the market. Futures trade is expected mixed in limited trade. The pullback from previous gains in outside markets during overnight trade is expected to put limited to moderate pressure on most cattle trade, which posted aggressive triple-digit gains on Tuesday. Even if Tuesday's rally can indicate that a market bottom has been set, given the uncertainty in outside markets and continued concern of how coronavirus will impact overall economic health over the coming months, the road to recovery will be a long and winding one. Wednesday slaughter is expected near 121,000 head.
Strong underlying support Tuesday helped to create short- and long-term support through the entire complex. This may spark increased underlying confidence in the lean hog market as a whole, but building pressure in outside trade during overnight markets is expected to create market volatility through early Wednesday. Although most of the recent pressure is being seen in financial and energy markets, the lack of confidence that continued market gains could create price pressure early Wednesday morning. There continues to be growing uncertainty as to just how quick a market recovery could develop, which may keep traders in limbo, potentially allowing prices to swing in wide ranges on a daily level over the near future. It is important to remember that the lean hog and pork market continues to be more global focused than the beef market at this point. So economic levels in China will continue to have a significant role in hog price movements that may not develop in cattle trade. Cash hog prices are called $1 lower to $1 higher with most bids expected steady to firm. Slaughter Wednesday is expected at 495,000 head. Saturday runs are expected at 150,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Sharp triple-digit gains that flooded through cattle trade Tuesday helped give the market the dose of medicine it needed. This could indicate a change in long-term market direction for live cattle and feeder cattle prices.
| 1) | The initial light cash cattle trade Monday following the sharp early week market losses may not define the weekly cash market price, but will create a significant barrier to move prices higher even with strong underlying futures support. |
| 2) | With packers continuing to keep packer schedules active, the limited overall negotiated trade over the last couple of weeks is expected to keep packers extremely short-bought. This should create the need to secure additional cattle numbers through the next couple of weeks in order to fuel still aggressive plant runs through the end of the month. | 2) | Boxed beef values turned lower Tuesday, breaking the stability from last week that had defied moves in futures and cash markets. This could indicate further beef value losses as the wholesale market tries to catch up with the cash trade. |
| 3) |
Strong support quickly flooded into cash hog markets Tuesday afternoon, with the focus on the continued need to gain access to market-ready hogs by packers no matter the direction of futures trade over the last week.
| 3) | Continued strong pork production is not expected to change, limiting the upside market support even if active export trade develops over the coming months. This could once again focus on domestic saturation, leaving prices in a sideways market trend. |
| 4) | Spot April lean hog futures continue to distance themselves from long-term lows in late January. Prices are now over $3 per cwt above these support price levels, which is helping to spark moderate underlying support as traders continue to step back into the complex. | 4) | Pressure in outside markets may create active position squaring through the last half of the week, making nearby lean hog futures more vulnerable for a market pullback midweek. |
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