General Comments:
Firmer cash cattle trade last week helped to focus on market support heading into the last week of August. Trade last week was generally $1 to $2 per cwt higher than the previous week, although the fact that trading ranges were wider than in the previous few weeks is starting to show uncertainty in the market. This could lead to a short-term market high as Labor Day is quickly approaching and many times will create a pullback in price levels through early fall months. The cash market is expected to remain sluggish Monday. Although showlist distribution and inventory taking will be done, it is possible that bids and asking prices may not develop until later in the week. Futures trade is expected to shift lower. Although triple-digit pressure developed Friday in anticipation of bearish cattle on feed numbers, the actual report was much more bearish than expected. This could create significant widespread pressure in both live cattle and feeder cattle trade Monday. If nearby live cattle futures break away from the recent support in October contracts, the potential for additional losses during late August is significant with initial support levels near $106.50 per cwt, while a move to $103 per cwt is possible. It is expected that most of the upcoming holiday buying needs have been placed, creating additional concern that the upward run in boxed beef values the last two weeks may be starting to fade. If beef values do start eroding ahead of and through the Labor Day Holiday weekend, additional underlying pressure may continue to develop in live cattle futures as well as cash cattle trade.
Lean hog futures are expected mixed following the moderate-to-firm pressure late last week. The expected weakness developing in the cattle complex may create some spillover support in lean hog trade as traders look for a place to land if moderate-to-active liquidation develops in cattle futures. The general trend in hog futures has been higher over the last two months, although it has been a bouncy ride higher. Lean hog futures have been anything but consistent with active buying quickly followed by a moderate price retraction. Through all of this, there has been little change in market fundamentals. The strong triple-digit loss in pork cutout values Friday is concerning and could lead to additional uncertainty about the ability to move current supplies through the system over the next several days and weeks. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents lower. Slaughter Monday is expected at 483,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Traders will be focusing on the morning release of cash cattle summaries. It is expected to point to firmly higher cash values last week, with weekly averages likely to be near $1.50 per cwt higher than the previous week. This would represent a $11 per rally in cash cattle trade over the last two months.
| 1) | Cattle placements in July landed at 111% year-ago levels. This is well above the trade estimate and the range of estimates. This will further curb market expectations through early 2021 as these cattle are expected to reach market weight during the first quarter of 2021. |
| 2) |
Cattle slaughter continues to edge higher with an estimated kill last week at 652,000 head. This would be the highest slaughter rate in nearly two months and represent increased packer activity heading into the fall.
| 2) |
Sharp triple-digit losses on Friday may not be enough to focus on the increased cattle placement and total cattle on feed numbers in Friday's report. This could spark underlying pressure in nearby and deferred contracts Monday.
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| 3) |
Traders will focus on Monday's Cold Storage report, looking for increased movement of pork product during the month of July, while potentially limiting the amount of frozen inventories leading up to the Labor Day holiday.
| 3) |
Sharp triple-digit losses in pork cutout values may suggest that most upcoming holiday buying may be wrapping up. A shift in active buying may spark renewed pressure through nearby lean hog trade in the coming days.
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| 4) |
Despite the Friday pullback in futures trade, lean hog futures remain near two-month price highs. The strong shift higher in futures prices over the last week has reestablished potential resistance levels at or above $55 per cwt in nearby contracts.
| 4) |
Bearish outside market moves Monday morning could spark renewed pressure in lean hog trade during the first half of the week. Most of the recent price support in lean hog futures has been focused on technical support, which is easily and quickly influenced by other market shifts.
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| #completecalfcare |
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