General Comments:
Cash cattle trade remains undeveloped Tuesday morning with bids and asking prices yet to be fully established. It is expected that there still remains some upside momentum within the cash cattle complex although the pullback in futures trade may be showing that the top may be near. With Labor Day still in the horizon, the focus on increased overall demand support through the next few weeks should help to spark increased optimism about the ability to move increased amounts of product through the holiday weekend, and give feeders the ammunition they need to hold onto expectations of moderately higher cash business as the week continues. Although it is too early for the upcoming Friday's, cattle on feed report, and pre-report estimates to have a significant impact on price movements, the ability to get a good look at cattle numbers in feedlots as of August 1 could delay some cash business until the end of the week. Futures trade is expected mixed Tuesday morning. Although the shift lower Monday does add some underlying concern for further price support in live cattle and feeder cattle trade, the fundamental support still holding in cash cattle prices and boxed beef values through the middle of August will likely limit widespread pressure. But with that being said, the significant shift in corn prices over the last week has created some changes in trade mentality, as traders are focusing closely on production costs. This seems to be the first significant uptick in grain markets through the summer in which feeder cattle and live cattle trade has been significantly affected. Previous market swings through late spring and summer months have been focused on plant issues and beef demand availability based on COVID issues, making feed price moves a secondary market factor until this week.
Positive market support in lean hog futures while cattle markets tumbled lower was an odd sight to see Monday, but at the same time a welcome relief to the battle worn lean hog complex. The focus on continued upcoming demand support ahead of the Labor Day holiday sparked underlying gains in all nearby and most deferred contracts, although price moves were contained to a narrow to moderate gain by the end of the session. October futures was the big winner of the day, moving 50 cents higher to $53.52 per cwt. This move tested resistance levels seen last week in the complex, giving hope that renewed Tuesday support could develop and move prices above last week's highs of $53.82 per cwt. If nearby contracts can break through these price levels in the next couple of days, there is expected to be renewed upside potential developing, sparking a combination of commercial and investment trade activity in the coming days and weeks. But traders are also focusing on the lack of follow through support in pork cutout values. The one day dip lower Monday is far from marking a market top, but the inability to continue the recent movement higher over the last two weeks could cause some additional concerns that prices may be nearing seasonal highs. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Monday is expected at 478,000 head.
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Growing expectations of higher cash cattle trade as the week continues is likely to instill underlying fundamental support through the entire cattle market in the coming days.
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Recent gains in corn and soybean meal prices have quickly changed the focus of the cattle market away from holiday beef demand growth, to short- and long-term production costs. The abrupt shift in corn market prices will continue to have long-term implications in feed costs and potential gains for feeders through the next several months.
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Boxed beef prices continue to show firm support as choice beef cutouts have marched higher, gaining over $17 per cwt over the last month, as more focus develops on upcoming holiday demand and potential strong beef movement through the rest of the fall months.
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Triple-digit losses in feeder cattle trade quickly caused some uncertainty about further gains developing in cattle trade. Feeder cattle futures typically hit seasonal highs in late July or early August, which could create further concerns about additional losses in all cattle trade.
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Cash hog values continue to post underlying support, indicating that packers continue to actively step into the market in order to gain access to needed supplies through the month of August.
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Pork cutout values dipped lower Monday adding questions of additional price support even though the upcoming Holiday weekend remains three weeks away. This could limit further fundamental support in all lean hog trade.
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Firm gains in spot-month October lean hog futures Monday is pointing to further support across the entire lean hog complex. Although current supply levels may limit aggressive price gains in the near future, the ability to set two month highs Tuesday is likely to spark renewed technical support across the entire complex.
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Despite the recent test of last week's market highs, the current supply of market ready hogs remains abundant, and may limit upside market moves in the near future. Significant changes in pork demand or hog numbers is likely to be needed to push nearby price levels significantly above $55 per cwt in the near future.
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| #completecalfcare |
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