Interest in cash cattle trade is expected to
remain limited through most of the morning. A few initial asking prices
restated is expected, but nothing of significance is likely to develop
until midweek or later. Bids are unlikely early Tuesday, and when they
do develop later in the week, limited initial movement from last week is
likely. It is likely that asking prices will redevelop around $108 to
$110 in the South and $178 to $180 in the North, while bids later in the
week would likely start near $103 to $104 in the South and $172 in the
North. That being said, both sides are likely to wrap things up before
late day Friday ahead of the long holiday weekend. Limited attention is
being put on the lower daily slaughter numbers as the freshness of the
Tyson plant fire has faded and packers settle in to the "new normal," at
least until the damaged plant comes back online. Daily slaughter levels
have settled around 116,000 head with increased Saturday runs making up
the difference between previous production the last two weeks. This is
expected to be the new norm as overall plant throughput is likely to
have little net change through the rest of the summer. Keeping up with
increased supplies through the fourth quarter of the year is likely
going to be the biggest challenge, but currently, cattle futures and
trade is so short-term focused given the recent market gyrations that
late year production capacity is still on the back burner of issues to
deal with.
Market volatility has remained heightened
through the last week with limit moves in either direction creating even
more uncertainty and lack of long-term market direction. Limit gains
developed on trade optimism Monday based on the idea that recent
back-and-forth tariffs had made China want to come to the table and talk
trade in a significant way, seems to have fizzled with uncertainty
about where this will leave market optimism through the rest of the
week. The announced trade deal in the works with Japan is expected to
remain a positive move in the right direction. But it needs to be clear
that this deal is yet to be signed, and there is still little detail
about the specifics of any trade deal. The assumption is that increased
market access for pork will be available, which will be a good sign for
the pork industry, but access to the Japan market is still not a
replacement to the Chinese market, which will likely be uncertain in the
near future. Cash bids are expected steady to $2 lower with most bids
$1 lower. Expected slaughter Tuesday remains near 480,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Active early week gains in live
cattle and feeder cattle futures have sparked underlying buyer support,
creating the potential for late week gains redeveloping in the complex.
|
1) |
Momentum in beef cutout values the
last two weeks is quickly slowing. This is creating questions if the
wide spread between cash and beef values can continue.
|
| 2) |
The announcement of a nearly
completed trade deal with Japan remains supportive for beef products,
helping to create underlying confidence in long-term export demand for
beef.
|
2) |
Continued uncertainty surrounding
trade issues with China is expected to create additional market
volatility through the end of the week. This could add to the still weak
market structure that developed the last two weeks.
|
| 3) |
Limit gains Monday has once again
broken away from long-term lows. The ability to bring additional buyer
support to the complex Tuesday has the potential to test short-term
highs, creating additional momentum through the end of the month.
|
3) |
Pork values and cash hog markets
continue to weaken. The uncertainty of short- or long-term movement in
domestic demand and large hog supplies continues to cause concern given
the wide discount of futures trade to cash prices.
|
| 4) |
Lean hog futures remain oversold
given the sharp pressure over the last week. This could create a sharp
market correction following the emotional pressure sweeping through the
complex the last week.
|
4) |
The increased market focus and
volatility on securing a trade deal with China seems to be creating more
short-term market waves than long-term direction. The lack of substance
between Monday's claims that any progress is being made in a trade
agreement with China is likely to leave the market unsatisfied in the
near future.
|
 |
| #completeherdhealth |
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