Following another round of steady-to-lower cash
cattle trade Thursday, it appears that the tone of the market may have
been set, although some additional trade is likely to trickle into the
market through the day Friday. Cash trade in the South remained steady
with earlier trade at $113 per cwt. But this is still $2 per cwt lower
than last week. Dressed trade in the North developed at $180 to $182 per
cwt Thursday. This is generally $4 to $6 per cwt lower than last week's
price levels. Although weakness continues in the market through the end
of the week, it is uncertain if feeders will allow cattle to leave lots
at even lower prices, or will hold out as they hope for price support
next week. The fact that spot futures prices have bounced higher and
lower within a $3 per cwt price range over the last week creates hope
that the next round of buyer support is just around the corner. Futures
trade is called generally lower as renewed pressure is expected to
redevelop in outside markets. Continued weakness in Dow Jones futures
trade in premarket trade is likely to add to the near 1,000 point loss
on Thursday in the Dow Jones index. Once again, movement in live cattle
and feeder cattle futures trade has little to do with overall cattle
market value or beef prices, but the general tone of outside markets.
This is making traders unwilling to move back into the complex. Given
triple-digit losses in nearby live cattle futures and most feeder cattle
futures Thursday, the focus is on sustaining long-term price support
set last week. If support holds through the end of the session, then
potential market gains are likely early next week. But if support levels
fail, additional liquidation is likely to sweep through the complex.
Friday slaughter is expected near 120,000 head.
Strong underlying price support moved into lean
hog futures trade Thursday while most other financial and commodity
markets posted moderate-to-aggressive losses. At first glance, this
seems genuinely odd, and hard to explain. But a deeper look into what is
going on in the lean hog futures complex indicates that overall hog
trade and the pork complex is looking past domestic market movements and
the current scare of the coronavirus, as the focus continues to be on
the China market and outside world demand needs. With new coronavirus
cases in China on the decline, demand growth is expected as the country
returns to a more normal routine. This may add increased stability in
the lean hog trade the next several days, and could serve as an example
to other commodity markets, especially the cattle trade, once the
current selling momentum slows. Aggressive gains are unlikely in the
near future, but traders continue to focus on the ability to bring
additional open interest back to the complex through the end of the
week. Cash hog prices are called $1 lower to $1 higher with most bids
expected 50 cents higher. Slaughter Friday is expected at 495,000 head.
Saturday runs are expected at 205,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Long-term outlook for beef demand
remains firm, as the focus on current price levels is expected to impact
short-term expectations. This is evident in limited pressure in fall
and winter live cattle contracts Thursday, despite the aggressive
softness in nearby trade.
|
1) | Additional losses in cash cattle trade developed Thursday as dressed cattle prices are selling $4 to $6 per cwt lower than last week. The continued weakness in futures and cash markets is limiting significant short-term recovery efforts. |
| 2) | Even though boxed beef values have struggled to post firm gains last week, beef cutout values remain generally stable, which is impressive. This indicates firm fundamental support is holding in the beef complex despite the volatility surrounding the cattle market. | 2) | Triple-digit losses in nearby live cattle futures and most feeder cattle trade Thursday is pointing to the ability to hold and maintain long-term support levels set last week. A move below these levels will likely spark additional active liquidation. |
| 3) |
Strong gains developed in pork
cutout values Thursday due to moving additional pork supplies in
domestic and export markets despite uncertainty surrounding the
coronavirus and concern that consumer buying patterns may change.
|
3) | Widespread outside market weakness will make it difficult to draw additional buyer support back to the lean hog complex at the end of the week. Traders can only buck the outside market direction so much before limiting interest from additional traders to step back into the complex. |
| 4) | Active support in nearby lean hog futures trade at the end of the week is sparking additional buyer interest as traders focus on building on recent price support. The focus on regaining demand support in China and other Asian countries continues to keep lean hog traders optimistic. | 4) | Aggressive pork production in the U.S. will continue to be a challenge for aggressive buyer support over the upcoming weeks and months. |
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| #completeherdhealth |
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