Monday, July 20, 2020

Monday Morning Livestock Market Update - Recent Cattle Gains Focus on Additional Support

General Comments:
Cash cattle trade remains quiet early Monday morning as both sides are expected to be focusing on the release of average price levels last week and overall total trade in mandatory reports. Generally, cash prices last week are expected to be steady to $1 per cwt higher than the previous week, helping to bring underlying support and stability to the cash cattle market through the complex. The extreme hot weather the last week is expected to have had an impact on the entire industry, but hopes that more temperate weather conditions in the days to come could help to put less focus on weather conditions and more on the ability to increase overall slaughter numbers through the rest of the summer. Asking prices and bids are likely to be delayed until Tuesday or later in many areas, although it would not be unlikely that trade could trickle into the market through the week as been the case over the last few weeks. Futures trade is expected generally higher with the firm market uptrend, which developed last week in live and feeder cattle futures expected to spark some underlying buyer support. But last week's $2 to $3 per cwt rally in nearby live cattle contracts also makes position-taking opportunities very attractive, leaving the door open for mixed and potentially volatile price moves Monday morning. Monday's slaughter is expected at 118,000 head.
Lean hog futures are expected mixed in light-to-moderate trade Monday morning following the late-week pullback in price levels. Despite a strong market uptrend that has developed as prices have continued to shift away from recent market lows the last two weeks, the concern that follow-through support may be limited during the coming weeks and months. Pork cutout values have continued to show strong upward market support through the last few days, but the fact that burdensome market-ready hog levels are expected to remain until well into the fall may curb prices from breaking significantly higher. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Monday is expected at 472,000 head.
BULL SIDEBEAR SIDE
1)
Feeder cattle futures have quickly broken through price resistance, as the shift out of the $134 to $138 per cwt price range focused on potential buyer support moving back into the complex. This could leave limited but firm upward market potential in all cattle trade through the upcoming days.
1)
Hot weather over the last week is expected to create residual impact in the cattle market and growing conditions, although some areas are in line for some relief during the week. The brutal summer conditions may still have significant impact on growing conditions and the ability to move cattle to packing plants the next several days in many feeding areas.
2)
Steady-to-higher cash cattle trade last week is expected to kindle additional support in asking prices as the focus on establishing a seasonal low for the summer is gaining momentum.
2)
The strong market rally last week in live cattle and feeder cattle futures is expected to bring about increased market volatility over the upcoming days. The inability to drive cash cattle trade higher with the same intensity of futures trade and still weak beef values is likely to add market shifts to nearby live cattle contracts.
3)
Strong upward support in pork cutout values Friday pointed to additional strength in wholesale markets and potential demand growth for pork over the near future. Pork cutout values moved above $71 per cwt Friday, following a $3.84 per cwt gain.
3)
Despite the market rally in nearby lean hog futures last week, upward market support still remains limited due to the amount of hogs and pork available to the market. This could create moderate-to-wide price swings in the near future, limiting follow-through buying during late July.
4)
Lean hog futures have continued to gap higher over the last week, quickly breaking away from recent market lows. Prices have rallied nearly $6 per cwt from July lows, creating the expectation that follow-through buyer interest will continue to move back into the complex.
4)
Limited cash market support in the hog complex despite the recent gains in pork cutout prices and futures trade is likely to limit short-term support based on the amount of hogs still in the system. Cash hog values were reported at $31.55 per cwt on the National Direct Afternoon Hog report Friday.


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