General Comments:
Sharp losses in live and feeder cattle futures Monday sparked an unexpected run of cash cattle trade Monday afternoon. Although trade volume remained light, the significant weakness in market tone was undeniable as cash cattle sold $2 to $3.50 per cwt lower than last week's price levels with feeders trying to take protection in the event that further losses develop as the week continues. Live trade was reported at $106 per cwt, with dressed sales at $165 to $166 per cwt. It is uncertain just where asking prices or bids will develop through the day Tuesday or at this point if both sides will wait to see where the dust settles in the futures complex. But unless a significant shift is seen in futures and boxed beef values, the tone of the cash market for the week is expected to remain lower. However, it is still too early to tell if Monday's losses will be enough pressure to satisfy the weaker market structure as packers will likely limit buying interest in the upcoming days. The Oct. 1 Cattle on Feed report scheduled for Friday afternoon is also starting to gain some attention. Although this will not start affecting trade levels until later in the week, the expectation of increased placement levels will likely add even more underlying concern to current feeder cattle prices. Feeder futures are expected to open lower but given the extreme pressure in live and feeder cattle Monday, initial trade volume is expected to remain limited. But once more volume steps into the market, further market volatility may quickly develop.
Lean hog futures continue to show mixed market direction with strong underlying support still holding in nearby December contracts while the rest of the complex posted active losses Monday. The aggressive pressure in cattle trade caused significant market pressure in most 2021 contracts, which may lead to additional wide price swings through the first half of the week. Mixed trade is likely at opening bell, as a combination of follow-through selling pressure and active short-covering develops, especially in spring and summer 2021 contracts. The uncertainty of further demand support from domestic and export markets over the next several months continues to add uncertainty to the direction of long-term buyer support. But the ability of spot contracts to continue to surge through resistance levels is still keeping buyers active at this point. Cash hog prices are expected $1 lower to $1 higher with most bids steady to firm. Slaughter Tuesday is expected at 487,000 head. Saturday runs are expected at 225,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Feeder cattle open interest continues to expand despite sharp downward price shifts. This indicates traders are focused on a significant buy signal, given the oversold status of the feeder cattle complex over the last week. This could quickly turn market direction in feeder cattle, sparking price support in the near future. | 1) | Sharp, early-week pressure in live cattle futures posted significant uncertainty in all nearby live cattle trade. The inability to hold September support levels in nearby live cattle contracts sparked active technical pressure through the entire complex. |
| 2) | Feedlot buyers are expected to take advantage of the misfortune of significantly lower feeder cattle prices. This will significantly reduce purchase prices of cattle moving into feedlots over the upcoming weeks as cash feeder cattle prices continue to erode, causing discounted inventory costs, currently at 6-month lows. | 2) | November feeder cattle traded through much of Monday's session at limit-lower prices. Although markets closed leaving limits unchanged, on Tuesday continued market weakness is expected given the lack of support through the entire complex. |
| 3) | Continued strong, near-term buyer support moving into December lean hog futures is breaking through long-term resistance levels, pointing to further market expansion based on active product movement in domestic and export markets. | 3) | Firm pressure in cash hog and pork cutout values Monday is creating concerns that the recent market rally is coming to an end, at least from a fundamental perspective. This could limit additional short-term market support. |
| 4) | Despite the early week pullback in pork prices, cutout values continue to show strong upward support with the tone of the market pointing to further gains in the near future. | 4) | Sharp losses in deferred lean hog futures created growing uncertainty about the ability to maintain previous and expected price margins through the summer 2021 contracts. This could quickly change long-term market direction in the entire lean hog complex. |
 |
| #completecalfcare |
No comments:
Post a Comment