Cash cattle interest has been limited the last couple of days, which is expected to keep both sides sluggish early Wednesday morning. Packers are expected to bid similar to Tuesday around $107 live and $174 to $175 dressed basis. Asking prices are likely to become more evident as the day develops, although it is uncertain just how much trade will develop Wednesday. Given the trend for midweek trade in the South over the last couple of months, it is likely that there could be a push to trade at least some cattle by the end of the day, but the softness of the cattle market will likely keep packers from aggressively pushing bids higher in the next few days. With the upcoming holiday week, it is also uncertain just how many negotiated cattle are needed to fill procurement schedules. This could limit cash market support through the end of the week. Futures trade is expected to remain mixed in a moderate trading range. With strong gains Tuesday pushing prices off of contract lows, the focus now moves to follow-through buying and rebuilding underlying market support at these price levels. Weakness in feeder cattle trade will continue to limit the upside potential of the entire cattle complex in the next couple of weeks.
The strong market bounce Tuesday in lean hog trade helped to bring a sense of stability to the market, although traders remain cautious as the structure of the complex remains weak. Even though nearby futures rallied nearly $2 per cwt Tuesday, the fact that prices tumbled nearly $9 per cwt over the previous three trading sessions should not be overlooked. Follow-through buyer support will need to develop over the next couple of trading sessions in order for traders to take this market shift seriously and move it out of the "market correction" category. There will be a lot of emphasis on the initial moves Wednesday morning, which will likely direct the tone of the market through the rest of the month. Cash trade is called steady to $2 lower Tuesday morning with most bids $1 lower. Expected slaughter Tuesday is at 476,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong gains in live cattle Tuesday is helping to rekindle buyer support at new support levels of $103 per cwt in August futures. This could bring about follow-through gains through the end of the month. | 1) |
Continued early-week pressure in boxed beef cutout values Tuesday is limiting expectations of firming end of the month and pre-holiday beef demand growth. The inability to spark additional gains in wholesale beef values may limit continued support in futures trade this week.
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Beef demand is expected to remain strong through the upcoming holiday, which should bring additional support to wholesale beef values through the end of June.
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Feeder cattle futures continue to weaken, moving to new contract lows Tuesday while buyer interest developed in all other contract months. This may spark additional underlying pressure through Wednesday morning.
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Sharp gains have redeveloped in lean hog futures trade Tuesday, creating expectations of follow-through support Wednesday morning. This is expected to spark renewed underlying support levels following the market pressure.
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Sharp losses continue to develop in pork cutout values with traditional summer cuts like ribs and bacon showing firm pressure. Further erosion of these price levels will limit future price support in hog complex.
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A glimmer of hope continues to hold ahead of trade talks expected this week in Japan between U.S. and China. Although few expect any quick resolution at this point, the redeveloping of talks is viewed as a step in the right direction.
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Despite strong futures gains Tuesday, the structure of the hog market remains weak. Price levels continue to hover just above long-term support levels. This is leaving the entire complex in a vulnerable position as end of the month pressure could spark aggressive long-term pressure.
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