General Comments:
Cash cattle trade started to develop early in the week once again with light trade seen in most areas on Tuesday. Most of the activity developed in the South with prices hovering in a wide trading range of $103 to $108 per cwt. Although most trade was seen at $106 to $107 per cwt, $2 to $3 per cwt higher than last week's average price. Very limited trade was reported in the north at $170 per cwt. There is not enough activity to establish a good market trend at these prices, but the consistency of higher prices is expected to spark renewed interest through the entire complex midweek. With the cattle on feed report not released until Friday afternoon, cattle buying may be stretched out through the end of the week, leaving the potential for wide market moves over the next few days. Early trade in cattle futures is expected mixed with live cattle contracts expected to be confined to narrow early trading ranges. The renewed support in feeder cattle trade seen Tuesday was a welcome sight, although most of the buying stepping into the market was focused on easing corn prices and traders covering early week short positions. The volatility in the market, combined with the still strong moves in beef cutout and cash cattle trade may make it hard to sustain significant price losses in futures trade in the near future. That being said, the upside moves in live cattle and feeder cattle trade over the next week could be curbed by uncertainty in beef demand following the Labor Day holiday.
Lean hog futures quickly broke away from early week market support with aggressive triple-digit losses Tuesday creating concerns that additional pressure may develop through the rest of the week. October futures led the market lower with a $2.10 per cwt loss, moving prices back to $51.42 per cwt, and moving through last week's price support. Although there is a possibility that the Tuesday's moves was focused more on readjustments and could bring about renewed buyer support through the rest of the week, underlying concerns about the ability to keep pork values elevated and cash hog prices moving in a positive direction seems to be weighing on nearby contracts. Nearby futures trade still remains well above long term support levels, and the recent moves would not suggest there is enough pressure in the market to revisit these recent lows. But the overall concern of continued market ready hogs available to the market and lack of optimism that pork demand will continue to ratchet higher once Labor Day is past is creating some underlying concerns through nearby futures. Deferred lean hog futures still remain at a significant premium to the nearby futures with limited pressure developing despite the price freefall in nearby contracts. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents lower. Slaughter Wednesday is expected at 484,000 head. Saturday runs are expected at 244,000 head.
| BULL SIDE | BEAR SIDE | ||
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Early-week development in cash cattle trade has pushed prices higher once again. This represents a seven-week run of higher cash cattle price levels, helping to build even more market momentum going into the the Labor Day holiday.
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Recent market volatility in feeder cattle trade continues to put more emphasis on the ability to spark increased concerns that the feeder cattle market may be at or near seasonal highs.
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Strong but steady support continues to move into the boxed beef cutout market. This is helping to instill increased optimism that prices may hold better than previously expected once holiday buying has wrapped up.
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Following what is expected to be a strong holiday demand weekend for beef clearance, there is growing concerns that overall movement may slow through the fall months due to still limited food service demand.
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Active pork demand continues to be seen as traders focus on the last major grilling holiday weekend of the year. This could help to sustain additional cash and pork cutout market support through the end of the month.
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Sharp triple-digit losses in lean hog futures focused on technical liquidation Tuesday. This break lower and move below last week's support levels could create additional spillover pressure Wednesday morning.
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Aggressive price premiums continue to be seen in deferred lean hog contracts with summer hog futures holding a $20 to $25 per cwt premium to spot contracts. The expectations of improved market support in 2021 is helping to create long-term optimism in the lean hog market.
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Growing concerns surrounding tensions between the U.S and China leave uncertainty surrounding increased pork exports to the country over the coming months and years. Without increased China exports, the ability to move current and future pork supplies will become a challenge, limiting long-term price support.
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| #completeherdhealth |
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