Limited market direction is expected early
Friday morning in cattle trade as traders remain focused on regaining
market stability as they slowly step back into the complex following the
early-week market tumble. But buyer intensity quickly slowed late
Thursday as traders focused on continued weakness in cash cattle trade.
Limited cash trade started to develop late Thursday afternoon in the
North at $170 per cwt. This is $10 per cwt lower than last week, and
generally in line with bids from the last couple of days. Barring
additional wide shifts in futures trade, it appears the tone of the
market may be set for the week with live trade in the South around $105
per cwt, while dressed trade in the North at $170 per cwt. This is
generally $5 per cwt lower in the South and $10 lower in the North from
last week's levels. The biggest question yet to be answered is just how
many cattle will sell at these price levels, as some feeders appear to
be willing to once again hold cattle over until next week given the
aggressive rally in beef values helping sustain margins. This should
give packers incentive to maximize capacity in the short-term due to the
significantly improved margins.
Late-day pressure in nearby lean hog futures
Thursday afternoon sparked renewed underlying pressure through the
entire complex. Although technically, prices still remain slightly above
long-term support levels, the concern that additional trade war issues
and promised retaliation for planned tariff levels by China will further
weaken the entire lean hog complex. Despite moderate- to-strong pork
sales in Thursday's Export Sales report, traders are looking past this
bounce higher and to what could be continued long-term pressure based on
a conscious effort from China not to actively buy pork from the U.S.
despite needing product to offset production losses. Mixed trade is
expected early Friday morning, although the tone of the market remains
weak. Cash bids are expected steady to $1 lower with most bids steady.
Expected slaughter Friday is at 464,000 head. Saturday runs are expected
at 141,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Beef cutout values have continued to
surge higher, posting triple-digit gains once again Thursday. This has
helped to elevate beef values and significantly improved packer margins,
with additional strength expected to continue over the near future.
|
1) |
Cash cattle trade remains weak given
the lower beef plant production levels and lower futures prices.
Dressed trade in the North fell $10 from last week's levels, sparking
increased uncertainty for the near future.
|
| 2) |
Continued pressure in grain markets
during the week has helped to offset long-term weakness in live cattle
and feeder cattle trade due to lower projected feed prices and
production costs.
|
2) |
The inability of live cattle futures
to follow the strong shift higher in feeder cattle trade is creating
additional concerns. With October futures still trading below $100 per
cwt, the potential to spark active buying through the end of the week is
limited.
|
| 3) |
The strong export sales levels seen
Thursday gives a glimmer of hope that additional trade can continue to
develop with China despite the volatility surrounding trade relations
and added tariff levels. This could create long-term support in the
complex.
|
3) |
Sharp late-day weakness Thursday has
sparked additional concerns of follow-through pressure across the
entire lean hog complex. October futures remain dangerously close to
breaking through long-term support levels once again, sparking potential
widespread liquidation.
|
| 4) |
Domestic demand remains stable
through the month of August with traders looking for continued active
movement through the end of the year. This may stimulate needed market
stability in cash and futures trade early next week.
|
4) |
Pork values continue to struggle to
gain significant ground despite moderate-to-strong gains in traditional
strong summer pork primal cuts. With the focus on "back to school" there
is less interest in rib and belly cuts, and more focus on traditional
cold-cut and lunch meat products, which tend to see limited short-term
support. This could limit additional support in pork products over the
near future.
|
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| #completeherdhealth |
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