General Comments:
Moderate
cash cattle trade developed Wednesday afternoon, which may have quickly
set the tone for the week with prices generally $2 to $3 per cwt lower
than last week. It is expected that further trade will remain stable
with midweek price levels, although more cattle sales are expected to
develop through the next couple of days. Live cattle sales in the South
were reported at $101 per cwt, while dressed cattle in the North traded
at $160 to $161 per cwt. Although there continues to be focus on readily
available cattle for packers needs, supplies are expected to tighten
over the next several weeks as the significantly reduced cattle
placements in the spring should be ready for market around October. The
upside of the market is likely to be curbed due to questions of demand
growth, but the focus on limiting downside market shifts over the next
couple of weeks could bring an end to the pressure over the near future.
Despite the strong midweek pullback in prices, the move lower did
little technical market damage with prices still contained within the
previous sideways trading range and could remain stuck in this
moderate-to-wide range through the near future. Feeder cattle futures
remain the most volatile of the cattle contracts with the underlying
bearish market swing over the last month still in control of market
direction as traders continue to pull away from seasonal highs in
August.
Active triple-digit gains once again
developed in nearby lean hog futures Wednesday, adding even more market
support to the entire complex. This last round of buying has quickly
moved prices above the previously illusive $60 per cwt price point, with
October futures settling at $61.37 per cwt. The aggressive move higher
in cash cattle trade Wednesday is expected to add even more underlying
support to the already strong market shift in the complex. Despite the
continued firm market tone of the market, the unchecked gains over the
last two weeks have moved prices to highs not seen since March in
October futures, and could quickly bring about late-week position
taking. A move lower is not unlikely in the near future, although the
ability to change the long-term direction of the market may be limited
at this point. Cash hog prices are expected $1 lower to $1 higher with
most bids expected steady to 50 cents higher. Slaughter Thursday is
expected at 485,000 head. Saturday runs are expected at 410,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Live
cattle futures continue to see limited downside market potential over
the next several weeks. With supplies of market-ready cattle expected to
quickly tighten over the next six weeks as lighter spring feeder cattle
placements will start to make their way to showlists, packers should be
much more aggressive through the fourth quarter of the year.
| 1) |
Weaker
cash cattle prices have developed once again with cash trade $2 to $3
per cwt lower in all areas. This midweek trade movement is likely to
have set the tone for the week, causing additional concern that further
pressure may develop through the rest of September.
|
| 2) |
Despite
concerns of decreased demand in food service demand this year, retail
consumer demand for beef has remained strong. The typical pullback in
beef demand after Labor Day may not be as significant this year based on
the changing pattern of buying habits over the last six months.
| 2) |
Beef
cutout values continue to erode lower as traders remain concerned that
additional pressure may develop following the Labor Day holiday. The
impact of reduced schools in session is expected to have an impact on
fall beef demand, but at this point, it is hard to measure the expected
change in demand patterns.
|
| 3) |
Sharp
triple-digit gains in cash hog markets flooded the market, creating
renewed fundamental support to the complex. The ability to narrow the
gap between cash and futures prices is adding increased bullishness to
the entire complex.
| 3) |
Weekly
Export Sales reports typically released on Thursday will be delayed
until Friday due to the holiday Monday. This will create uncertainty as
to the export activity China has had in the market over the last week.
This could limit the recent futures optimism as traders are still
actively concerned about trade relations with China.
|
| 4) |
October
lean hog futures not only broke above resistance levels of $60 per cwt,
the ability to surge past these levels and to new six-month highs is
creating additional momentum in the entire hog market.
| 4) |
With
lean hog futures surging higher over the last two weeks, the potential
for a market correction is becoming more likely. This could spark active
pressure, leading to triple-digit losses in the near future, but still
unlikely to cause a change in market direction.
|
 |
| #completeherdhealth |
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