General Comments:
Although more cash cattle trade is expected to develop over the next couple of days, the fact that trade was reported in the North and South on Tuesday continues to focus on the desire on both sides to get cash business done earlier than later this week. Light trade in the South at $104 per cwt live basis is $1 per cwt lower than last week's average, while Northern trade posted the most price pressure with limited trade reported but falling to $163 per cwt dressed basis. This is $4 per cwt lower than last week. Although later week trade may see some price support from these levels, the general consensus is that prices will remain lower than last week going into the Labor Day weekend. It is not unusual for cash cattle markets to trend lower around or after the Labor Day break as changes to overall demand continue in consumer patterns as the transition from summer to fall is represented by Labor Day. There is so much uncertainty right now as to what beef demand will look like over the next couple of months. With food service demand still struggling as COVID-19 concerns have limited dining out activities, limited capacity levels at those restaurants where dining rooms are open continues to have an impact on the amount of beef utilized. The upcoming football season will also impact overall demand, as attendance and tailgate routines have been adjusted and changed due to COVID-19. It will be months before the full impact on overall consumer demand will be evident to market prices. Much of this reduction is already factored into the market, but given the plethora of unknowns, market uncertainty may continue to develop. Futures trade is expected to trade mixed to mostly higher in light early trade with traders unlikely to focus on any major long-term market direction over the next few days as many traders are beginning to "check out" ahead of the holiday weekend.
Strong gains in nearby lean hog futures Tuesday was encouraging to see, given the recent market pressure, but technically these moves do little for market direction. What this market shift does do, is indicate that additional wide market price shifts could still develop as traders establish market ranges within a sideways trading pattern. Given the current condition of the hog market, this current pattern could hold through much of the fall months with nearby contracts hovering around the $55 per cwt trading range. The ability for pork values to continue to move higher during early September is encouraging, but given the current availability of pork in the system, even these levels are expected to become rangebound with little long-term changes expected to fall and winter demand that would bring about significant structural changes to the complex. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Wednesday is expected at 485,000 head. Saturday runs are expected at 108,000 head.
| BULL SIDE | BEAR SIDE | ||
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Feeder cattle futures have bounced off last week's lows, creating some renewed buyer support through the complex. Corn prices have pulled back from the strong upward market shift, leaving the expectation that further production costs may be limited for the feeder cattle market. This could help add stability in feeder cattle prices during early September.
| 1) | Holiday buying is expected to be essentially wrapped up in beef markets with Labor Day traditionally signaling the last major "grilling weekend" of the summer. Concerns of a pullback in beef demand through the next few weeks could put price pressure on futures and cash market trade. |
| 2) |
Strong premiums continue in spring 2021 live cattle contracts with April futures trading $10 per cwt spot October futures. This indicates that renewed buyer support is expected early next year based on both likely demand support and tighter supply levels in the upcoming months.
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Cash cattle prices have started to see further market pressure during the week as trade developed on Tuesday. Limited trade volume is expected this week with plants closed this upcoming Monday for Labor Day, which will limit the amount of cattle needing to be purchased.
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Pork cutouts continue to show resilience as traders focus on potential demand stability over the coming weeks. Although the upside potential may still be limited, pork gains is creating limited optimism through the entire complex.
| 3) |
Cash hog prices remained unchanged Tuesday, breaking the recent trend of higher cash values. This could signal that buying is quickly cooling through the complex, bringing about moderate softness in the entire complex surrounding the holiday weekend.
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| 4) |
Early week buyer support in October lean hog futures is helping build support through the entire lean hog complex. This may add stability even though volume is light through the rest of the week.
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Packer schedules will be significantly impacted due the Labor Day holiday next Monday. This will further limit the ability to clear market-ready hogs from the system despite attempts to add additional production to Saturday schedules. The burdensome supply issues will continue through most of the year, likely limiting aggressive price support until early 2021.
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| #completeherdhealth |
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