General Comments:
Following
another round of light-to-moderate trade Wednesday, the overall lack of
support in cash markets seems to be focusing on the generally weak
undertone as packers continue to have easy access to needed cattle even
though overall plant speed has returned to a pre-coronavirus level. The
backlog of cattle in the system still leaves feeders with limited
options in the cash trade as a "take it or leave it" packer mentality
continues. Cash cattle trade is expected to hold in the current market
range through the end of the week, with live deals hovering from $92 to
$95 per cwt, mostly $94 to $95 per cwt, while dressed trade is at $152
to $155 per cwt. This is about $1 per cwt live basis below last week's
average, and steady to weak from trade early in the week. At this point,
both sides are gearing up to wrap trade up by the end of the day with
the desire to head into the weekend covered for needs next week. Futures
markets will remain closed Friday and will close early Thursday, ahead
of the holiday. This will likely limit additional market participation
through the Thursday session, although the firm gains on the first
trading session of July is helping to rekindle expectations of further
support, limited as it may be. Thursday's slaughter is expected at
121,000 head.
Underlying market pressure is
likely to continue in lean hog futures trade Thursday as traders
temporarily break away from long-term market moves and likely focus on
end-of-the-week positioning. With markets closed Friday due to the
Fourth of July holiday, the continued concern about price, recent
long-term lows and abundant hogs available to the complex, continues to
weigh on price levels. Currently, all nearby contracts are trading below
$50 per cwt, creating a generally weak market structure as limited
demand support is likely over the near future. The hope that strong pork
demand surrounding holiday movement will bring a sense of price
stability still exists, but the sheer mass of hogs available is likely
to limit any extended upward market swings. Cash hog prices are expected
$1 lower to 50 cents higher with most bids expected steady. Slaughter
Thursday is expected at 468,000 head. Friday slaughter is expected at
200,000 head. No Saturday runs are expected due to the Fourth of July
holiday.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Strong
underlying support in all live cattle futures late Wednesday is helping
to bring renewed buyer support back to the complex during early July.
With August futures still trading well below $97 per cwt, there is
potential that further long-term gains may start to trickle back into
the complex based on expected growth in beef demand.
| 1) |
With
August live cattle futures still holding well below $100 per cwt, the
concern that prices could hover within this lower price range through
much of the summer is causing concern about further buyer support
redeveloping in the near future.
|
| 2) |
The
upcoming holiday weekend is creating optimism for growth in beef demand
and the ability to clear additional product through retail and food
service channels. The focus on feature activity of beef products
surrounding the long holiday weekend could aggressively move large
amounts of beef into consumer hands over the next few days.
| 2) | Sharp gains in grain markets has quickly sparked increased production costs to all cattle breakeven levels. This may continue to cause pressure to live cattle and feeder cattle trade over the near future based on the expectation that new-crop corn supplies are likely to be lower than previously expected due to acreage reductions. |
| 3) |
Pork
cutout values appear to have stabilized with increased gains seen
midweek. The ability to ratchet cash hog and pork values higher during
early July will go a long way in bringing additional buyer support to
the complex.
| 3) |
July
through October lean hog futures continue to struggle with prices below
$50 per cwt. These price levels are limiting new trade volume with some
traders expecting prices to hover within this trade range over the near
future.
|
| 4) |
Active
slaughter has so far been unphased by the uptick in COVID-19 cases
across the country. This has allowed packing plants to maintain active
and aggressive schedules to further reduce the backlog of hogs in the
production system.
| 4) |
Little
market activity is expected Thursday ahead of the holiday weekend. This
can allow for wide but volatile price shifts due primarily to lack of
volume and can shift from fundamental or technical market direction.
|
 |
| #completeherdhealth |
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