General Comments:
Cash
cattle markets remain extremely quiet with both sides unwilling to be
the first to step up to the plate as of Tuesday. Given the holiday
Monday, it is understandable that the process is delayed, but the lack
of overall focus going into Wednesday morning as asking prices are still
hard to find, as well as bids unavailable could delay active cattle
trade until late in the week. The expectation that cash cattle trade
will continue to slip lower due to ample supplies available and
uncertain demand for fresh beef following the Labor Day holiday could
also limit the enthusiasm for feeders to step into the market early in
the week. Renewed support in futures trade is likely as traders continue
to bounce off lows set last week. The ability to build underlying
support in October futures at $105 per cwt heading into the fall months
is expected to create underlying momentum through the complex. Traders
not only focus on the uncertainty of beef demand growth, but the
potential that the worst of the market pressure is behind us, breaking
away from seasonal market trends in a marketing year that has not
followed seasonal patterns to this point. Uncertainty remains about
rebuilding beef demand growth in restaurant and food service industries.
With a hodge-podge system of schools and colleges reopening in person
or virtually for the fall, it is going to be hard to determine just how
much overall end user demand there will be through the next couple of
months. This could create volatile market shifts based on short-term
beef value movements.
Firm underlying support
continues to be built through the lean hog complex surrounding the
Labor Day weekend. The ability to continue to spark underlying technical
support in nearby contracts is bringing about increased buyer support,
and testing resistance levels. October futures were unable to break
through the $60 per cwt barrier Tuesday, although the potential for
underlying follow-through buyer support Wednesday morning could quickly
move prices above this threshold, sparking renewed underlying support
across the complex. The recent gains in pork cutout values seem to be
gaining additional momentum as traders return from the long weekend.
This may spark increased longer-term buyer support, finally putting
traders' minds at ease that the summer lows are well in the past. Mixed
trade is expected through the complex with uncertainty of just how much
renewed momentum will develop across the complex as traders are
unwilling to get too far ahead of fundamental strength moving forward.
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 407,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Active
triple-digit gains in nearby feeder cattle futures Tuesday is creating
hope that seasonal lows have been set. The ability to sustain
light-to-moderate buyer support in fall and winter feeder cattle
contracts could help to establish long-term market support moving back
into the complex.
| 1) |
Continued
pressure in boxed beef values is creating concerns that additional
softness may develop through the upcoming weeks, putting even more
pressure on the cattle complex through the next several weeks.
|
| 2) |
A
combination of commercial and noncommercial buying developed across
cattle futures Tuesday. This is likely to add additional momentum as the
week continues with traders building off recent lows, potentially using
the holiday weekend as a distinct signal to spark additional long-term
market support.
| 2) |
Beef
demand uncertainty continues to loom over the market as traders have a
hard time pinpointing the ability to project overall usage through the
end of the year. With many schools focusing on distance learning and
retail foodservice demand still sluggish, there is uncertainty about how
much product will be consumed over the coming weeks and months.
|
| 3) |
Pork
cutout values have continued to march higher during early September.
This is helping to build underlying firm fundamental support as traders
focus on the potential for increased gains in the coming days and weeks.
| 3) |
Continued
tensions with China will create a weak undertone through the lean hog
and pork market. Although active export support has still developed
through the summer months, less buying by China could quickly add
bearish pressure to the complex.
|
| 4) |
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 break
away from the previously weak market pattern.
| 4) |
The
unchecked market rally last week in nearby lean hog futures has pushed
prices $6.50 per cwt higher. This wide market swing is creating the
opportunity for light-to-moderate price corrections in the near future,
as traders may have the opportunity to square positions in the upcoming
days.
|
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| #completeherdhealth |
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