General Comments:
Live cattle made a valiant attempt at extending gains after the large price reversal to start the week. Traders may be looking at the significant discount of futures to cash and may try to narrow the gap. However, weaker cash may limit the extent of the gains. The overall trend of the market is sideways to lower. It is a bit unusual for cash cattle to trade early in the week, even if volume was light. But it gives the indication lower prices will be posted. There is concern over beef demand in the near-term, which will limit any sustainable price rally until there is a shift in fundamentals. Boxed beef prices continue to struggle.
Lean hog futures are struggling as solid supportive news is difficult to find. The trend is down and the July contract clearly shows the weakness, making a new contract low Tuesday. Cash continues to decline with no sign of a low. The backlog of supply weighs on the market as it may be difficult to absorb supply over the next few weeks. Cash is called lower as there is little incentive to move prices higher in the face of burdensome supply.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Technically, cattle futures may have established a reversal, which could cause short-covering and further buying interest.
| 1) |
Cash cattle price continues to decline as boxed beef prices weaken. Packers have no need to bid up to purchase supply. Early business this week indicates sellers want to move cattle aggressively.
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| 2) |
Boxed beef demand may be showing signs of increasing as more at-home grilling may take place.
| 2) |
The trend is down and as long as futures show weakness, packers will continue to lower bids. There are plentiful supplies of cattle that will be available to the market.
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| 3) |
Hog futures have been able to close above support as the market is oversold and ripe for a rebound.
| 3) |
July hogs establishing a new contract low does not bode well for the market. There is no catalyst to propel the market higher or even provide support.
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| 4) |
More premium is being held in later contracts on the anticipation supply will not be quite as burdensome later in the year.
| 4) |
Cash weakness translates into futures weakness. Both domestic and international demand is lower. Packers see a wall of hogs ready to come to the market, eliminating the need to post higher bids.
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| #completeherdhealth |
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