Cash cattle interest remains quiet at this point, which is not surprising for a Tuesday. The firm support in futures trade Monday should help to bring some underlying interest back into the complex, although there still remains uncertainty as to the depth of buyer activity that will redevelop this week. Given the strong pressure last week after the 5-Area Weekly Average cash cattle price fell $4.86 per cwt, anything less than steady will be viewed as extremely bearish. If any sense of underlying support remains in futures and boxed beef values, steady-to-higher cash prices at the end of the week are expected. But given the volatility in the market, a lot can happen before now and the end of the week to limit cash activity. Asking prices may start to develop through the day Tuesday, but bids may not be widely seen until sometime Wednesday or later. Futures trade is expected higher as spillover buyer support is likely to return to the complex. The potential for early mixed trade may develop as limited early volume could allow for additional position-taking as traders adjust positions and cattle futures try to dig themselves out of the hole. Even though the move lower last week indicated a sharp jump off the cliff, the climb higher is expected to be a much slower and deliberate process. Tuesday slaughter is expected near 121,000 head.
The inability for lean hog futures to hang onto session highs Monday is likely to carry uncertainty into early morning trade Tuesday. The focus on summer contracts closing lower is adding additional questions about short-term demand support and the impact that coronavirus has and will continue to have on global economies. The expectation is that the underlying tone in lean hog futures trade will firm through the near future could help to slowly build additional support through the complex. It is important to remember that lean hog futures trade did not react the same way as nearly all other markets over the last week. The main reason for this is that the majority of coronavirus-led selling took place in late January across lean hog futures. This was when the first significant impact was seen in China and traders remain concerned about China demand for pork due to the virus. With so much focus still being placed on the ability for China to step back into the market and purchase U.S. pork supplies, the potential to bring aggressive rallies to the market will likely be limited. The positive news in lean hog futures is the triple-digit gains held in late 2020 and early 2021 contracts as most traders feel the most significant impact of the virus will be over by that point. Cash hog prices are called $1 lower to $1 higher with most bids expected steady to weak. Slaughter Tuesday is expected at 495,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Renewed support flooded into live cattle and feeder cattle futures Monday. Although nearby live cattle trade did not close limit higher, moves above $2 per cwt helped to rekindle buyer support as traders try to regroup following last week's losses.
| 1) | It is important to remember "one day's moves do not make a trend." Even though positive price direction has been seen, the market remains vulnerable for further market swings in either direction. |
| 2) | Triple-digit gains held in boxed beef values Monday afternoon. With Select cuts moving back above $200 per cwt, and gaining $2.25 per cwt, the focus on regaining market support through early March is helping to sustain additional underlying fundamental strength, which should add even more support to futures trade later in the week. | 2) | Growing uncertainty of longer-term impact on domestic and global economies will continue to keep markets unsettled over the near future. This could bring about increased price pressure through the next couple of weeks as the coronavirus issue remains an emotional one, with decisions not totally based on logic. |
| 3) |
With all of the focus on coronavirus and the impact to pork demand and changes to short-term buying patterns, it is important to remember that African swine fever continues to be an issue in many Asian countries even though it is being overshadowed by coronavirus news. This will continue to create strong demand for U.S. pork products in the short and long term.
| 3) | Cash hog prices posted moderate weakness Monday. The lack of early week support is creating some additional concerns that the aggressive packer schedules still may not be keeping up with hog supplies through early spring. |
| 4) | Aggressive moves higher in pork cutout values Monday is likely to bring even more market firmness to the entire hog and pork complex during early March. | 4) | Any significant move higher in nearby lean hog futures is expected to be slower to develop than either cattle trade or outside markets based on the timeline of market pressure in the hog complex. There remains less emotion driving the hog complex at this point, which could limit the upside movement in nearby lean hog contracts. |
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| #completecalfcare |
