Cattle markets remain in turmoil following the
fire that partially destroyed the Kansas beef packing plant. This is
expected to keep cash markets undeveloped over the near future, as
packers and feedlot managers are likely unwilling to even venture to
offer a bid or asking price. With futures trade in live cattle and
feeder cattle moving to limit losses as soon as markets opened Monday,
the inability to trade through the day created additional uncertainty.
This leaves no indication of how many sell orders are still out there to
still be implemented when markets open Tuesday morning. Live cattle
futures will be limited at $4.50 per cwt, while feeder cattle trade
limit will be $6.75 per cwt. The concern is that although this reduction
of plant capacity will likely be bullish for overall beef values,
cattle prices may see additional pressure based on limited packer
availability and current supplies of cattle in feedlots, or going to
feedlots. This move not only focused on growing fundamental concerns,
but the early week moves also took out significant technical support in
the cattle complex.
Light activity is expected in the lean hog
futures complex with increased pressure developing in deferred contracts
following sharp market losses in cattle trade and grain markets. Mixed
price levels are expected Tuesday with traders looking for some
additional support following the firm rally last week. But pressure and
lack of a market bottom in the cattle complex is likely to add even more
bearishness to the lean hog complex during early Tuesday trade. Cash
bids are expected steady to $2 lower with most bids $1 lower. Expected
slaughter Tuesday is at 476,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Beef values have surged higher early
in the week with the focus on tighter wholesale beef supplies as a
result of the destroyed packing plant in Kansas. This is expected to add
even more support to wholesale and retail beef values.
|
1) |
Limit cattle losses Monday left
markets essentially untraded as electronic sell orders flooded the
market with markets opening at the market limit. This creates the
potential that the same process may develop early Tuesday, due to
uncertain amount of sell orders that still went unfilled.
|
| 2) |
Limit losses in corn prices will
quickly reduce overall production costs of fed cattle. Once market
stability is seen following the early week losses, traders are expected
to once again focus on feed prices.
|
2) |
Long-term changes in packer capacity
is expected to spark a fundamental shift in cattle demand until the
dust settles, and the industry can find out what sustainable short-term
packer capacity is without this one plant.
|
| 3) |
Firm gains during August has allowed
for October lean hog futures to hold well above long-term lows. This is
likely to spark additional underlying commercial support as traders
focus on increased end-of-year domestic demand.
|
3) |
Sharp losses in surrounding markets is expected to spark additional weakness in the hog complex Tuesday morning.
|
| 4) |
Cash hog discounts continue to grow
compared to spot-month lean hog futures trade. This is expected to
stimulate additional cash buyer support the next couple of weeks as
packers take advantage of this widening market spread.
|
4) |
Wholesale pork values eroded in
early week trade as limited moves developed in most primal cuts after
pork values have shown some increased stability over the near-term. This
may add increased underlying weakness given the continued cash market
pressure in the complex.
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| #completeherdhealth |
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