Tuesday, September 25, 2018

Tuesday Morning Livestock Market Summary - Weaker Market Tone Expected Tuesday

GENERAL COMMENTS:
Cash cattle activity is expected to remain silent through most of the session with bids and asking prices currently undeveloped and likely to remain that way until midweek or later. The pressure in futures trade on Monday is expected to spark some additional market liquidation with early movement expected to remain steady to lower in several contract months. Some attempts of short-covering interest moving into the market early is likely due to limited volume as markets open, but the overall tone remains weak. The increased beef in storage in the Cold Storage report will cause additional concerns for many traders.
Follow-through support in cash hog values is expected to redevelop through the morning with bids steady to $2 per cwt higher. Most bids will remain firm to $1 per cwt higher as packers look for additional hogs and are able and willing to increase bids in order to keep plants full. Tuesday's slaughter expectations are at 466,000 head with additional focus on picking up a portion of the losses from last week associated with flooding and the hurricane. Futures trade is expected to be mixed to mostly lower, most contracts are expected to trade weak to $1 per cwt lower during the morning, but limited volume in the opening minutes of trade could keep prices uncertain.

BULL SIDEBEAR SIDE
1)
Firm gains in boxed beef values have continued to redevelop following underlying support in futures and cash trade late last week. This continues to look toward the future and potential active movements of beef through the end of the year.
1)
Strong triple-digit pressure on Monday continues to add uncertainty about follow-through support given the increased availability of cattle in the Cattle on Feed report. This will continue to be a cloud hovering over the market for the near future.
2)
Despite the market pullback, live cattle futures continue to trade in the upper level of short-term trading ranges, following the break out of the sideways pattern in the last couple of weeks. Despite short-term adjustments, this still is causing traders to take a bullish long-term view of the market.
2)
Beef in storage has continued to surge higher, with record levels of beef available in coolers at 503.4 million pounds. This is 6% above year-ago levels and likely to add even more pressure on cattle prices.
3)
Cash hog values continue to ratchet higher with increased buying support moving back to the complex. This may continue to build underlying support.
3)
Total pork available in storage increased, although only 1% over year-ago levels, the short-term movement looks less encouraging with a 6% bounce from month-ago levels.
4)
Pork cutout values remain firm to strong with prices adjusting higher following an 86 cent per cwt rally in carcass values through the day Monday. This is expected to help stabilize the market following the bearish Cold Storage report.
4)
Pork bellies in storage have increased significantly. Even though bellies are down from month-ago levels, pork bellies in inventory grew 82% from year-ago levels. This is likely to add volatility to all primal cuts through the near future.

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