Cash cattle activity is expected to remain
sluggish early Wednesday morning with bids and asking prices not
expected to be clearly defined following the strong shift higher in
futures trade Tuesday and general sluggish interest from packers at this
point. Packer bids are expected to improve through the day, but the
typical low, token bids are likely through the morning, and may improve
through the day. Both sides will focus on the ability to trade cattle
midweek, at least in some regions of the country, as this has become the
trend over the last few weeks. But the volatility this week in futures
trade and beef values may limit overall cash market activity with both
sides trying to determine a long-term market direction. Futures trade is
expected to be mixed to mostly higher Wednesday morning. The tone of
the complex is firming following aggressive market support in feeder
cattle and live cattle trade. The opportunity for position is becoming
more available, but the recent technical support could spark additional
short-term support during morning trade.
Limit gains on Tuesday are expected to leave
lean hog futures firm early Wednesday morning. Initial trade is expected
to remain mixed with a combination of follow-through buying and
position-taking developing while volume remains limited in the first
hour of trade. Expanded trading limits are available in all lean hog
futures Wednesday, allowing markets to move $4.50 per cwt in either
direction. Unlike the cattle complex, the strong market rally in lean
hog trade has not broken out of the weaker longer-term trend with prices
still near the bottom end of the trading range. Lean hog futures will
need to string together two or three moderate-to-strong gains in order
to solidify the market move is more than just a market correction. This
could cause some underlying volatility and market uneasiness as traders
will continue to focus on limited overall pork demand while production
levels remain strong. Cash trade is called steady to $1 lower Wednesday
morning with most bids steady to weak. Expected slaughter Wednesday is
at 477,000 head. Saturday runs are expected at 38,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Live cattle futures broke out of the
longstanding sideways market trend with October futures moving to
three-month highs Tuesday as a result of triple-digit gains. This is
expected to spark additional follow-through buyer support midweek.
|
1) |
Boxed beef values tumbled lower
Tuesday, creating concerns that overall beef demand is slowing following
the Fourth of July holiday. This fundamental pressure may limit
continued future market gains.
|
| 2) |
Feeder cattle futures have rallied
$11 per cwt since the last week in June, sparking an impressive market
rally that is attempting to break out of the wide sideways market
pattern, which developed over the last two months.
|
2) |
Continued concerns about current and
future grain market moves will still have a significant impact in the
direction of feeder cattle futures. Trades are trying to assess weather
conditions and the long-term production levels, which is likely to keep
feeder cattle market volatile over the near future.
|
| 3) |
Limit gains Tuesday is putting
increased focus on the potential to break away from recent market lows,
and build increased underlying futures support at or above $79 per cwt.
This is expected to bring additional commercial buyers back into the
complex over the near future.
|
3) |
Despite firm gains in pork values
and futures trade, cash hog prices remain stuck in the weaker market
trend as packers are able to source market-ready hogs without
significant efforts. The availability of hogs ready for market is
expected to limit the upside market potential over the upcoming weeks.
|
| 4) |
Active support developed in pork
cutout values Tuesday. The triple-digit rally in wholesale prices was
sparked by strong underlying price support in most primal cuts.
|
4) |
Sharp futures gains on Tuesday may
create increased market volatility as the underlying tone of the lean
hog futures remains weak. With prices hovering near long-term lows,
underlying market pressure could continue through the near future.
|
 |
| #completeherdhealth |
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