General Comments:
Cash cattle activity remains on the back burner Tuesday morning with traders focusing on establishing overall market ranges and focusing on the ability to further fine tune market direction following the full week of reports last week. Cattle showlists remain mixed for the week, but packers continue to focus on securing procurement levels in the upcoming weeks as the market starts to fall into a more traditional fall routine with end of the year and holiday beef demand expected to be the focus over the next couple of months. Cash trade may not become fully active until midweek or later, although it is likely that feeders will aggressively price cattle when asking prices develop over the next couple of days. The underlying support in futures trade and choppy back and forth moves in beef values is giving feeders the incentive to focus on further cash market gains through the week. Futures trade is expected to remain mixed in a narrow-to-moderate range. Following the ability for traders to shake off Friday's bearish Cattle on Feed report during Monday's session, sparking limited buying in nearby contracts. The focus is returning to a more fundamental routine, which should support more stable price levels over the near future, although live cattle and feeder cattle trade may continue to hover within a wide sideways trading range over the near future.
Trade in lean hog futures contracts is expected to remain mixed. Traders are focusing on the split direction between immediate market moves and intermediate direction through the end of the year. Strong export gains are likely in the next couple of weeks due to Germany being unable to export to its normal trading partners outside the European Union, which is sparking follow-through support in October futures. But this aggressive momentum is stopping short of December and February contracts. This is leaving the December contracts at a $7 per cwt discount to spot October, creating concerns about the ability to sustain the recent market surge once initial optimism wears off. Growing supplies of market-ready hogs will continue to keep the market under pressure through most of the fourth quarter, with traders uncertain that demand growth can offset this supply gap beyond the next couple of weeks. Cash hog prices are expected $1 lower to $2 higher with most bids expected steady to $1 higher. Slaughter Tuesday is expected at 486,000 head. Saturday runs are expected at 179,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Firm cash market gains the past two weeks could indicate the fall seasonal low has been set in cash cattle trade. Over the last several weeks, cash cattle trade has mirrored moves in 2019, creating hope that additional firmness is still likely during the month of October. | 1) | Limited interest in feeder cattle trade during early week activity seems to be creating more long-term pressure on the cattle complex. Feeder cattle futures remain focused on upcoming seasonal placements and recent feed price gains, which will likely limit significant buyer interest in the near future. |
| 2) | Nearby live cattle futures continue to trade in the top end of the short-term market range, with traders focusing on much needed market stability and the potential to stabilize beef demand through the end of the year. | 2) | Beef values slipped lower early in the week, creating some concern that further pressure may continue to develop during late September. Late-year holidays are not typically focused on beef demand, which could limit the ability to move additional product out of freezers during the upcoming weeks. |
| 3) | Active gains in pork cutout values are pointing to expectations of strong export pork sales in Thursday's report. The idea that active pork movement will continue to develop is sparking short-term buying interest. | 3) | Cash hog prices shifted lower Monday, posting the first significant losses in several trading days. Although it is too early to show concern about prices tumbling lower, the inability for packers to aggressively bid market-ready hogs is raising some attention. |
| 4) | Aggressive gains in October lean hog futures has led the complex higher, widening the aggressive premium to other nearby contracts as traders focus on potential strong pork demand from worldwide partners as the U.S. helps to stabilize supply levels around the world through the end of the year. | 4) | Hog supplies remain abundant and on the edge of burdensome as packers continue to maximize production levels through the fall months. The inability to slowly but steadily increase packer throughput in the upcoming weeks could add further pressure to lean hog futures. |
No comments:
Post a Comment