General Comments:
Light-to-moderate trade in the South has developed midweek at $99 to $100 per cwt. The higher prices are welcome, but with values still hovering well below the actively traded October futures of $107.45 per cwt, basis levels remain relatively weak. Cash trade has been very quiet in the North, with some dressed trade developing Wednesday at $160 per cwt, but most trade still needs to develop the rest of the week. Overall cash cattle prices are $2 to $3.50 per cwt above last week's price levels. It appears that cash values above $100 per cwt live and $160 per cwt level dressed will be needed to gain significant further attention from the industry, but as weekly trade during early August flirts with these levels, there is hope that follow-through cash buying will develop ahead of the upcoming Labor Day holiday. After establishing multi-month highs Monday in both live cattle and feeder cattle futures, prices remain near these resistance levels, but unable to gain enough underlying support to continue to shift prices higher. But with the underlying support in the cash cattle trade and firmness in beef values, it is expected that light buyer support will continue to hover in all nearby cattle trade, potentially breaking through these resistance levels at the end of the week. Despite high daily COVID-19 numbers, there appears to be less anxiety about the overall impact on beef demand through fall months. Maintaining and increasing beef demand over the next month as schools and colleges reopen, will be important in the direction of the beef complex and may set the tone for the rest of the year. Thursday's slaughter is expected at 118,000 head.
Hog futures continue to hover in the bottom end of the short-term price range with limited support developing in nearby contracts, despite the triple-digit gains in deferred 2021 contract months. The focus in lean hog futures has changed little over the last several weeks with traders looking at short-term bearish market factors, while the outlook remains moderately better during early 2021. Market-ready hogs remain abundant to packers, impacting cash values over the last week, and adding pressure to August and October futures, which have fallen below the $50 per cwt price levels. Although current prices remain slightly above support levels, the concern that markets will remain stuck within this lower trading range through most of August is causing underlying weakness through futures and cash values. Pork cutout values posted a nice bounce higher Wednesday, but without a steady streak of steady-to-higher prices in pork values, it will be hard to indicate a firming market trend that will help give significant support to cash or futures values. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents lower. Slaughter Thursday is expected at 475,000 head. Saturday runs are expected at 228,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Firming cash cattle trade during the first week in August is a welcome sight, although the hope for additional support continues to develop as live cattle prices remain at or below the $100 per cwt price levels.
| 1) |
The inability to spark significant further support in nearby live cattle futures through the end of the week following stronger cash cattle trade is causing concern about the ability to steadily shift prices higher ahead of the Labor Day weekend, now only a month away.
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| 2) |
Feeder cattle futures continue to hold at five-month highs following aggressive buyer support in nearby contracts over the last week. The focus on establishing renewed buyer support at these price levels is sparking additional optimism through the entire cattle complex.
| 2) | Futures are technically overbought, which may result in some profit-taking and a market correction. Weakness yesterday could set the stage for the rest of the week. |
| 3) |
Active gains have developed though the week in pork cutout values. This support is helping to spark renewed interest in market fundamentals, although at this point, futures trade has not fully bought into the recent gains in meat prices. Sustained pork value support is likely to have a longer-term impact, affecting winter and summer contracts more than nearby futures.
| 3) |
Continued pressure in nearby lean hog futures is putting more focus on resistance levels at or near $50 per cwt. This continues to add underlying weakness to the entire hog complex, which may continue through the month of August.
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| 4) |
Lean hog futures remain oversold as nearby contracts inch closer to long-term lows once again. Consistent support in cash hog values and pork cutout prices could quickly bring active buyers back into the market with nearby contracts able to move significantly higher before experiencing significant resistance levels.
| 4) |
Limited-to-moderate pressure in cash hog prices has put a wider market spread between cash and pork values during early August. This lack of support in the complex continues to add concerns of stagnant price levels in the near future.
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| #completeherdhealth |
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