Last week was not kind to cattle producers with
cash taking a tumble of $3 to $5. The continued steep decline and no
short-covering into the weekend will keep the markets on the defensive.
Packers will start the week with lower bids attempting to capitalize on
the weakness of futures. There still is no bottom to the market even
through it is severely oversold. Funds continue to liquidate long
positions, which could mean more downside.
Hogs futures are set to stumble with the news
that President Trump is ready to raise tariffs on $200 billion worth of
Chinese goods to 25% versus the current 10% that was placed on these
goods in July. He also threatened to add 25% tariffs on an additional
$325 billion of their products possibly soon thereafter if they do not
come to a resolution over trade. China is now considering cancelling the
meeting that was to take place this week to work on a resolution. This
will hit the hog market hard just as it has impacted grains and other
markets. The steep losses on Friday in cutout values will not help the
case for higher prices.
| BULL SIDE | BEAR SIDE | ||
| 1) | The cattle complex is ripe for a correction of a severely oversold condition. Short-covering could cause a substantial price rally before the market is balanced again. | 1) | The fact that there was no profit-taking in the cattle complex into the weekend gives the impression sellers are confident there is more downside potential. |
| 2) | Historically, sharp sell-offs of this magnitude do not last long with at least a 50% retracement taking place. Steady cash could be enough to provide a spark to ignite some profit-taking. | 2) | Packers will start the week with lower bids based on futures direction as well as the potential for an escalated trade war with China. All markets are being hit hard and spillover may impact the cattle complex. |
| 3) | Stronger futures prices during the second half of last week indicates some bullishness developing over the potential for better summer demand. China may be back to purchase pork at any time due to the severe reduction of their hog herd. | 3) | Lean hog futures are expected to crash due to the potential for increased tariffs on Chinese goods by this Friday and the potential of $325 billion more of goods with added tariffs in the near future if China does not agree on a trade resolution. |
| 4) | A wide sideways trading range has been established with the potential for futures to retest the top of the range again. Futures have not succumbed to spillover selling of cattle. | 4) |
Steep losses on Friday in cutout
values will set the tone for Monday with packers expected to bid lower.
The hope for further pork purchases by China in the near-term may have
been dashed due to the weekend developments of increased tariffs.
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| #completeherdhealth |
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