General Comments:
Cash cattle trade started to trade in the South Tuesday with prices marked at $95 per cwt live basis. This is fully steady with last week, but there is still a lot of week to go. The combination of bearish market shifts in futures and boxed beef values combined with hot July temperatures, it is very possible that these early-week price levels may not be able to hold over the next couple of days. Bids are expected to remain sluggish through much of the morning, but with asking prices still elevated near $100 per cwt live basis, it is likely that there could be some uncertainty about active trade midweek. Given that many of these feedlots still have a lot of heavy cattle waiting for a delivery day, and there seems to be no short-term end in sight for the scorching temperatures, it is unlikely that many feeders will reject steady to lower money if the alternative is carrying these cattle for another week in these current weather conditions. Heat stress has been one of the biggest concerns as the backlog of market-ready cattle has grown over the last couple of months, as heavy weight cattle are most vulnerable to these hot temperatures, increasing death losses as well as off feed issues. Futures trade is expected mixed with a generally weaker tone hovering across the complex. Continued pressure in beef values, combined with the underlying lack of support in cash cattle trade has limited the previous momentum seen across the complex. With August futures unable to hold prices above $100 per cwt, questions of if a short-term market high has already been set is creeping into the conversations. This could allow prices to chop lower in all nearby contracts over the near future as overall beef demand growth through the upcoming weeks remains a legitimate question that at this point cannot be answered. Wednesday's slaughter is expected at 120,000 head.
Even though the triple-digit losses in August lean hog futures Tuesday were significant, the inability to hold prices above the $50 per cwt threshold late Tuesday afternoon is expected to be the takeaway message when markets open Wednesday. Early trade is likely to remain mixed as a combination of follow-through selling will be met by short-covering attempts. Even though pork values continue to remain unsupported during early-week trade, and the large herd size will put emphasis on market pressure over the near future, nearby lean hog futures still remain well above support levels. There continues to be limited downside market pressure ahead given the already depressed cash values and futures market weakness. The concern for most traders and market watchers is that even though prices may not test new lows in the near future, there is limited support to aggressively draw buyers back into the market. This could continue to keep prices hovering within the current range around or below the $50 per cwt through much of the summer. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Wednesday is expected at 475,000 head. Saturday runs are expected near 197,000 head.
| BULL SIDE | BEAR SIDE | ||
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Active cattle slaughter activity continues to be seen through early July. The ability to maintain slaughter levels near 120,000 head per day and a strong Saturday run will continue to whittle away at the backlog of cattle through the system.
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Beef values have continued to erode lower with the recent pressure in cash markets during the summer months doing very little to support overall demand for beef. This could continue to plague the market as consumer movement of beef is still limited and may not change direction anytime soon.
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Active trade continues to roll out of spot August contracts and into October futures. The moves into the October and December contracts is a welcome sight as nearby liquidation is still staying actively involved in the live cattle complex rather than exiting the market all-together.
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August futures have continued to back away from prices at or above $100 per cwt. Although current prices are still near short-term highs, the inability to trade in the "triple-digit" level is curbing market momentum.
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Firm gains in cash hog prices during early week trade continue to put the focus on packers need to become slightly more aggressive in order to fill the growing daily and weekly slaughter runs. This could continue to be the focus as packers target the daily rate near 475,000 head moving through the month of July.
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Swift losses flooded the August lean hog futures complex Tuesday. This not only pushed prices below the $50 per cwt price levels, but it continues to stimulate the liquidation of August futures as October contracts have become the most actively traded contract month, putting more emphasis on third-quarter price levels.
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Firm market support continues to hold in deferred lean hog futures. This continues to distract the attention away from the short term market moves and the potential that market support through spring and summer 2021 contracts may continue to be seen based on expected demand support and changes in hog numbers by that point.
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Daily hog slaughter rates have become limited by worker attendance at plants. Given the recent volatility in the packing industry, as well as the aggressive six-day-a-week schedules it is understandable the uncertainty through plants. Labor issues at plants will likely be the main focus on slaughter revisions over the near future as packers attempt to maximize production levels through the rest of the summer.
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| #completecalfcare |
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