General Comments:
Limited cash market direction is expected Monday morning as both sides return from the long holiday weekend. The typical showlist distribution and inventory-taking routine early in the week is expected to keep all participants busy through much of the morning, although some limited business may develop before the end of the day as been the pattern over the last few weeks. Cash markets last week posted additional price pressure, but the narrowing of the extremely wide price ranges may be indicating that cash market trade could be getting back to a normal rhythm. There will be growing uncertainty about the ability to maintain beef demand through the remainder of the summer given the traditional sluggish demand cycle following the Fourth of July and continued changes in overall demand for beef in the food service industry. The strong rally in futures trade last Thursday created some underlying technical support with triple-digit gains developing in all nearby contracts. August futures moved to the highest levels in more than a month, as prices quickly approach $100 per cwt levels once again. The ability to sustain these gains early Monday is likely to spark renewed commercial buyer interest as traders look for the potential to build on recent support in both live cattle and feeder cattle futures. Monday's slaughter is expected at 117,000 head.
Lean hog futures continue to aggressively search for a bottom to this weaker market structure, but so far, it has been a struggle to find enough bullish market news to give buyers incentive to change direction through the summer months. It is uncertain just how traders will react following the long holiday weekend. In general, it has been a relatively quiet holiday weekend when it comes to global political and economic direction, and news. But this has led to increased speculation surrounding the ability to sustain and grow domestic and export pork demand through the upcoming summer months, while nearby lean hog futures hover at or near contract lows. There is concern that the current amount of hogs and recent gains in feed costs will create additional market struggles through the rest of the summer, and most of remaining 2020. The ability to bring additional price support back into wholesale and retail pork values through the upcoming days and weeks should make significant strides in refocusing traders on market stability and further gains through the upcoming days and weeks. Cash hog prices are expected $1 lower to 50 cents higher with most bids expected steady. Slaughter Monday is expected at 454,000 head.
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August live cattle futures closed at $99.40 per cwt last week. This is a $3.13 per cwt rally from lows set earlier in the week. The technical support developing during early July broke through initial resistance levels and set month-long highs across nearby live cattle trade.
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Continued weakness in cash cattle prices last week will create uncertainty as traders return to the market following the long holiday weekend. This could create uncertainty as packers still have access to growing numbers of market-ready cattle through the rest of the summer.
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Boxed beef values ended higher at the end of last week. Although these gains were narrow, the ability to bring stability to wholesale beef values during early July will go a long way in rebuilding market confidence and hopefully regain price support following the market free fall in the last few weeks.
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Traditionally beef demand struggles following the Fourth of July, for the rest of the summer. Combined with limited summer travel plans and sluggish demand in food service markets, the concern that active beef movement becomes very real over the next couple of months.
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Strong gains in pork cutout values Thursday pointed to renewed buyer interest. This is expected to be more than pre-holiday purchasing, it could indicate a change in market direction through the rest of July.
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August lean hog futures remain near contract lows, with limited support expected to develop as traders return from the holiday weekend. This could continue to hold nearby price levels under $50 per cwt as traders remain focused on weakness in cash values and uncertain pork demand growth in domestic and export markets.
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| 4) | Lean hog traders appear to be moving away from short-term hog supply concerns and more focused on rebuilding the long-term structure across the industry. With prices at or near contract lows, this may continue to bring firm buyer support back into the market, especially for traders focused on long-term growth potential. | 4) |
As traders quickly return to the market following the long weekend and sluggish activity last week, the concern that increased COVID-19 cases around the country will further hamper efforts of reopening the country and business structure with several states taking measures to curb the spread of virus infections and rolling back previous phases of reopening. This could significant impact restaurant activity and overall pork demand.
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| #completecalfcare |
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