Thursday, May 30, 2019

Thursday Morning Livestock Market Update - Cattle Futures Expected Mixed on Further Grain Moves

GENERAL COMMENTS:

Light cash cattle trade developed in the South Wednesday afternoon at $115 per cwt. This is generally steady with last week's weighted average, and likely enough business in these areas to set the tone for the rest of the week without a major disruption in futures trade. Business in the North is undeveloped, but may soon follow with bids expected to redevelop at $115 or higher live and $185 dressed. Asking prices on cattle left on showlists remain at $117 to $118 live and $188 and higher dressed. It is uncertain if active trade will develop Thursday, or if the back and forth will continue until sometime Friday as typically seen in the North. Futures trade is expected mixed with traders still concerned about the lack of pressure early in the week, especially in feeder cattle. Traders will closely follow the direction of the corn and soybean market due to wet weather and lack of planting progress in many areas of the country. This is expected to have a dramatic impact not only on feed prices, but on the overall availability of feed at the end of the year.

Firm follow-through support is expected to redevelop across lean hog futures trade with the previous market tumble still leaving the complex ripe for additional corrections on the upside of the market. This could add even more uncertainty to the complex as traders focus on more uncertainty with China while overall pork demand the rest of the year is expected to remain strong. Due to the holiday Monday, export sales reports will be delayed until Friday, which is when we will know if additional pork sales have developed in China. Traders are also starting to focus on increased potential exports to other countries who may be sending pork to China. With the China trade war still in full swing, the role of U.S. pork may be to backfill into other countries in order to replace product they export to China. Cash trade is called steady to $2 lower Thursday morning with most bids $1 lower. Expected slaughter Thursday is at 475,000 head. Saturday runs are expected near 223,000 head.


BULL SIDE BEAR SIDE
1)
Active buyer interest moving into live cattle midweek is creating buyer support. This is building on the underlying support levels which have been defended this week.
1)
Feeder cattle futures remain under pressure with continued concern surrounding the ability to supply enough corn supplies due to the late and delayed planting.
2) Corn prices broke away from the aggressive double-digit rallies Wednesday, which sparked increased late-day interest in feeder cattle trade. Any reprieve from the skyrocketing grain market shifts is expected to support cattle trade. 2) Lack of cash market support in the last week of May is causing some additional long-term concerns that current cattle and beef supplies may overwhelm summer demand expectations, limiting the ability to sustain recent beef values.
3) Strong triple-digit gains quickly and aggressively flooded back into lean hog trade midweek. This could indicate a change in market direction as traders focus on upcoming seasonal demand and tighter live hog supplies. 3)
Active pressure in pork cutout values focused on a double-digit loss in rib and belly cuts. With summer demand building, pressure in these seasonal cuts is creating increased concern about overall demand growth.
4) Given the wide trading range the last several weeks, technical market shifts could mean prices will go sharply higher in early June. This could allow for a wide market swing in the upcoming days and weeks as buyers step back into the complex. 4)
Despite the midweek rally in hog futures, the entire complex still remains under pressure as traders try to defend short-term support levels. Without a strong end-of-the-month market close, trade pressure may quickly develop as prices continue to give back gains that developed during March.


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