General Comments:
Cash cattle trade is rolling into Tuesday morning with little to no market direction following the inability to get anything started early in the week. With showlists generally smaller, the focus on the ability for packers to become more aggressive as the week continues is adding some hope that cash prices can continue to build on the slow but steady market growth seen over the last couple of weeks. The 5-state weekly average price for last week moved to $97.24 per cwt, which is an 88-cent per cwt gain from the previous week. Although cash markets continue to trade at a firm discount to the futures trade, the potential to further narrow that gap is likely to bring expectations of further support in cash markets as the week continues. Futures trade posted sharp losses in live cattle and feeder cattle markets Monday afternoon. This abrupt shift lower has little to do with the fundamental cattle on feed or cattle inventory levels, but more to do with technical market shifts and limited end-of-the-day volume in the market. The ability for all cattle trade to post moderate-to-strong gains through early trade Monday, but to reverse this trend before closing bell focuses more on electronic orders hitting "sell" signals. This sent a flurry of liquidation through the complex with current market volume and activity unable to sustain the current price levels. This move lower has the potential to spark renewed pressure early Tuesday morning, although little has changed fundamentally across the complex. Tuesday's slaughter is expected at 119,000 head.
Lean hog futures are expected to trade mixed in a narrow-to-moderate trading range Tuesday morning following mixed trade early in the week. The lean hog futures complex started to show some division through the complex with firm gains in nearby trade, while deferred futures posted firm-to-strong losses at the end of the session. Cash hog prices surged higher Monday, creating some additional hope that additional market support may develop over the near future, but this still did not help to ease traders concerns about demand uncertainty for pork over the next year, while overall hog supplies will remain strong through the winter months, and possibly into next summer. Further pressure in grain markets is pointing to expanded corn and soybean production despite pockets of dry areas through the Midwest. Lower feed prices are likely to limit herd reduction levels going into 2021, which is also adding to the lean hog price pressure through 2021 contract months. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Tuesday is expected at 475,000 head. Saturday runs are expected near 189,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Choice beef cutout values shifted higher Monday. The ability to hold prices above $200 per cwt is helping to indicate that beef values may have hit or be near seasonal lows, creating hope and expectations that further price gains will develop.
| 1) |
Sharp triple-digit losses were most evident in feeder cattle trade, creating a significant technical gap with September futures leading the market lower with a $3.12 per cwt loss. This turn lower could quickly change the recent underlying market support based on recent cash buying and stronger long-term market expectations.
|
| 2) |
Firm pressure in corn and soybean prices early in the week and improvement in USDA's latest good-to-excellent crop rating is expected to focus on lower feed costs through the end of the year and well into 2021. This could help to bring additional buyer support to feeder cattle prices once the current flurry of liquidation subsides.
| 2) |
Boxed beef values have struggled to gain support over the last week. Even though prices appear to be at or near seasonal lows, the concern that markets may hover in this price range (with choice cutout values near $200 per cwt) could cause a stagnant market.
|
| 3) |
Sharp gains in cash hog values Monday sparked significant support in nearby contracts as packers become more aggressive to maintain current processing schedules.
| 3) |
Strong pressure in deferred lean hog futures trade added underlying concerns about the ability to spark any significant buyer momentum through the entire complex. This could add increased volatility to lean hog prices during early August.
|
| 4) |
Currently strong pork packer margins are creating incentive to keep slaughter levels as large as possible through the month of July. Packer speed seems to be most limited by labor issues, although packers continue to push toward increased production through the rest of the year.
| 4) |
Growing uncertainty about where the relationship with China will go over the coming weeks and months will add even more concern through the hog complex as China continues to be a major importer of pork even due to the tensions.
|
 |
| #completecalfcare |
No comments:
Post a Comment