General Comments:
Cash cattle trade is expected to remain sluggish early Tuesday morning following the extended weekend and market pressure over the last two weeks. Given the shortened trading week, packers and feeders are expected to spend less time focusing on showlist distribution and inventory taking as typically seen early in the week. But this still is likely to delay trade until the last half of the week as asking prices and bids are not expected to be until midday Tuesday or later. The focus on limited cattle processing schedules due to plants being dark on Monday may continue to add uncertainty to the complex, but plants are expected to run at full capacity through the rest of the week, including a strong Saturday run in order to minimize the impact of the holiday closure. Futures trade is expected mixed in light initial trade, but with more volume stepping into the complex through the day, a combination of follow-through buying after Friday's gains as well as limited early selling pressure could leave prices within a narrow-to-moderate trading range with traders looking for increased direction as the week continues. The potential to spark renewed support will strongly focus on the ability to move additional beef product over the coming weeks and stabilize boxed beef values. Traditionally, demand slows following the Labor Day holiday. But given that spring and summer demand has been disrupted this year, the hope is that renewed food service and restaurant demand over the next several months will break away from typical beef demand patterns, and spark renewed buyer support in all markets.
Hog futures have continued to show resilience over the last week with continued end of the week buying, sparking additional technical buyer support across the entire market. October futures are trading at the highest level since May with prices quickly honing in on the May high of $60.15 per cwt. Sharp gains in pork cutout values over the last couple of days has rekindled bullish market expectations through the market, although traders continue to remain cautious going into the rest of September. Cash hog prices have continued to move higher, but a wide market spread is developing once again between cash hog and futures prices, creating concern that fundamental support may still be slow to develop in the coming weeks. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Tuesday is expected at 485,000 head.
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The potential to break away from post-holiday demand pressure and focus on building demand growth from restaurant industries over the coming weeks could limit seasonal weakness through the entire complex. This may spark futures support through the complex as traders move back into the complex.
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Boxed beef prices have started to erode over the last several days. This is creating concerns that further demand pressure may develop over the next couple of weeks.
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| 2) |
Long-term price support still remains the focus as spring live cattle futures are holding a $11 per cwt premium to spot trade. The focus on demand growth through late 2020 and early 2021 combined with unseasonal placements of cattle in feedlots has continued to support the expectations of stronger prices yet to come.
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Cash cattle prices posted $2 to $4 per cwt losses last week, creating the expectation that packers will be able to secure needed supplies at steady-to-lower money once again this week.
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Aggressive gains in pork cutout values over the last several market days has sparked renewed support in hog futures. This is pointing to counter-seasonal support that is likely to bring additional long-term support back to the complex.
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Cash hog prices have started to lose significant ground to nearby futures prices, still pointing to abundant hog supplies available to packers and creating concerns that the recent market support will not be carried through the entire complex.
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Lean hog futures have posted four-month highs with spot month futures testing resistance levels of $60 per cwt. A move through this level would likely spark renewed bullish technical buying as traders return from the holiday weekend.
| 4) |
Uncertain longer-term pork demand growth is causing questions if the recent surge in pork values will be able to continue. This may add widespread market volatility to the lean hog market as active volume returns following the holiday break.
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