General Comments:
Cash cattle markets are expected to remain silent early Monday morning following the late-week bounce in prices seen Friday. Showlist distribution and inventory taking should be the only activity Monday morning with bids and asking prices likely to be delayed until later in the week. Cash cattle prices are expected to have posted a $2 per cwt market gain last week from the previous week once average prices are released Monday. Trade seen in the South was been reported at $108 to $109 per cwt, mostly $109 per cwt live basis, and $108 live and $169 to $170 per cwt dressed. These prices are generally $2 per cwt higher than the previous week, and $1 per cwt higher than light trade seem the middle of last week. The continued but slow increase in cash values points to expected tighter supplies coming down the line in upcoming weeks. Cash and futures market traders will continue to focus on slaughter weights, but the expectation that October will show a significant corner has been turned in overall live cattle supply levels should support the market, especially the cash cattle complex. Futures trade continued to show pressure late last week, which may allow for further concern to trickle back into the complex. Continued support in corn markets and the grain complex in general has kept feeder cattle futures under pressure. November feeder cattle futures have not been able to find stability since starting the $8 per cwt price slide in late November. Although it is expected traders will try to establish underlying support through the complex, it is going to be very difficult to instill strong buyer interest if grain and feed prices continue to shift higher during October. Live cattle futures are attempting to find market stability with December contracts holding above $112 per cwt, based on recent cash market support and the expectation that additional supply tightness will help to maintain price gains over the near future.
Firm gains seen in lean hog futures over the last two weeks are re-establishing buyer support in lean hog futures complex. Although caution remains about continued demand growth in export and domestic markets through the end of the year, the expectation that continued strong product movement will be seen during October is helping to solidify near-term price levels. December lean hog futures have moved to short-term highs of $67.12 per cwt late last week, testing market expectations that further slow but steady growth may quickly develop during early week trade. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Monday is expected at 487,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Spot December live cattle futures ($112.60) continue to hold well above the 40- ($111.13) and 100-day ($108.46) averages. The ability to maintain this support is likely to spark renewed commercial and noncommercial buyer support through upcoming weeks. | 1) | Monday is a federal holiday with financial institutions and government offices closed for the day. This traditionally limits overall trade volume, likely keeping markets extremely lightly traded. |
| 2) | Late-week support in cash cattle trade last week is adding further support to cattle market fundamentals despite futures trade weakness and pressure in boxed beef values. | 2) | Boxed beef values shifted lower late last week, not only creating pressure at the end of the week, but pointing to firmly lower price levels from the previous week. The inability to spark renewed support in wholesale beef values will significantly hinder futures support over the next couple of weeks. |
| 3) | December lean hog futures are trading at 8-month highs following strong underlying support and increased export trade results over the last few weeks. The expectation that strong product movement will continue to fuel buyer support may continue to push nearby prices higher in the coming days. | 3) | The strong upward shift in lean hog futures is adding further concerns that a moderate market correction may develop. A pullback in prices would likely not hinder technical support in the market but would quickly disrupt the positive market momentum in the complex. |
| 4) | Expectations of continued market strength building through the summer of 2021 as hog supplies are scheduled to be reduced is still allowing deferred contracts to hold strong premiums. Summer 2021 contracts are trading at a $15 per cwt premium to spot December contracts, helping to stimulate long-term market interest. | 4) | Late-week pressure in cash hog and pork cutout values is likely to limit early morning buyer support in nearby futures contracts. This could allow for moderate to mixed trade over the next couple of days as traders wrestle with the ability to test further resistance levels over the upcoming days and weeks. |
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