General Comments:
The direction of the cash cattle market is still not fully defined as there is still a lot of cattle to trade and price shifts could further develop through the week. But the development of limited cash cattle trade at lower money continues to focus on the erosion of the cash market over the last few weeks. With boxed beef values still unable to stabilize as they continue to steadily move lower, packers are unwilling to actively step into the market with prices anywhere near steady. The light trade on Monday developed between $159 and $167 dressed basis, and $98 to $100 per cwt in the South. This is steady to lower than last week's average. Another week of sluggish trade and wide trade ranges will limit the transparency of where cash markets will be as the week progresses. Last week's average price fell $7 per cwt from the previous week, marking the largest weekly price shift lower in two months. Futures trade is expected to gain follow-through support after buyers stepped back into the complex Monday. Cash and futures prices returning to a more normal trade relationship is expected to add some stability as limited buying interest is likely to redevelop over the near future. Even though further price support is likely, the limited fundamental support is likely to keep prices within a narrow trading range in the near future. The market seems to have found firm underlying support near the $95 to $96 per cwt level, but the availability of market-ready cattle and continued concern of increasing beef demand through the rest of the summer months will likely limit any upward move with resistance still holding near $101.50 per cwt in nearby contracts. This could continue to allow live cattle futures to bounce around within a $4 to $6 per cwt price range without sparking any technical market shifts. Tuesday slaughter is expected at 119,000 head.
Buyer support remained slow but steady following initial market weakness, but the focus on renewed underlying support, no matter how limited it may be is expected to help stimulate additional buyer interest early Tuesday morning in nearby contracts. The lack of support in cash hog prices and pork cutout values early in the week continues to create some limited concern about consistent and steady price gains over the near future. With July futures still trading well below $55 per cwt, the focus on additional price support trickling into the market is helping to bring additional volume to the market. Traders continue to focus on the ability to increase pork slaughter levels on a daily basis, which may indicate additional longer-term support through the complex. This is limiting the downside market potential, although at this point, there is limited fundamental support to cause traders to expect strong upside movements in the futures complex. Cash hog bids are expected $1 lower to 50 cents higher per cwt higher with most bids steady to firm. Slaughter Tuesday is expected at 458,000 head.
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Firm price support in all cattle futures Monday afternoon is helping to bring additional underlying interest back into the complex. This is expected to increase overall buyer support as traders focus on building stability through the next couple of weeks.
| 1) |
Cash cattle trade tumbled lower last week, with additional pressure starting to develop as limited trade is seen this week. This is creating concerns of the ability to stabilize cash values anytime soon as prices continue to still remain vulnerable given the wide market shifts over the past couple of months.
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| 2) |
Steady increases in daily cattle slaughter numbers is expected to help to further limit concerns about tight supplies of beef to the market. This should stabilize overall demand, bringing consumer prices lower in the next several weeks.
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Retail beef values remain elevated despite the sharp losses in beef cutout values. This is having a significant impact in overall consumer buying patterns, limiting beef demand.
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Firm gains in August lean hog futures is helping to move price levels away from long-term support levels. The ability to hold price levels over $55 per cwt in August futures is expected to attract additional buyer support in the near future.
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Strong pressure in wholesale pork values redeveloped Monday. This is creating additional concerns of further market softness, which may further weaken cash values.
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Long-term production shifts are expected, which is likely to spark additional price support through 2021. Summer 2021 contracts are currently holding a $20 to $26 per cwt premium to current price levels, indicating production levels appear to be changing given the recent market uncertainty.
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Sluggish export and domestic demand given the wide price shifts in wholesale pork values is still limiting overall pork demand. This will likely limit the upper range of lean hog futures over the near future, further establishing a narrow sideways market trend.
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