Cash to set market direction on Wednesday

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Cattle: Steady Futures: Higher Live Equivalent: $199.91 + $1.22*

Hogs: Steady Futures: Higher Lean Equivalent: $133.12 + $3.16**

*Based on a formula estimating the equivalent of live cattle to packer gross proceeds. (The Live Cattle Equiv. Index has been updated to reflect recent changes in live cattle weights and grading percentages.)

** Based on a formula estimating Lean Hog ​​Equivalent of Gross Packer Sales.

Feeder cattle were in charge Tuesday, propelling above $2.00 in some contracts. Significantly weaker corn prices and strong demand from sales barns continue to provide support. Live cattle benefited from the spillover trade, but gains were dampened by cash uncertainty. However, Tuesday saw a few heads trade, raising some hopes that cash could at least remain stable this week. Boxed beef was higher with a $2.20 pick and a $1.07 pick. Crate beef trending higher improves packer margins which can result in higher revenues. Friday’s Cattle on Feed report and Cattle Inventory report may keep price action subdued for the rest of the week.

Hog futures showed spread trading activity on Tuesday, which has been a popular activity for some time. Traders weren’t too keen on the direction, but that might be different on Wednesday as a reaction to strong cash and cutouts might be evident. The National Direct Afternoon Report showed a big jump from $8.03. This was helped by necklines, which rose $3.16. Demand is good and packers need pigs. Packers can bid higher on Wednesday to get the hogs they need for the week. Battle speeds still leave a lot to be desired.

bull side BEAR SIDE
1)

The possibility of stable to higher cash cattle this week could support the market.

1)

Traders have been cautious about buying cattle futures due to uncertain demand.

2)

Hot weather affects livestock weight and reduces tonnage. Beef continues to be brought to market, requiring packers to buy more to source the same amount of beef.

2)

Demand for beef generally slows down during the hotter part of summer and we are in that time now. The market will have to prove itself.

3)

Hog traders may react to Tuesday’s strong cash and cutouts. Traders could be more aggressive as confidence grows.

3)

The slaughter of pigs is still under a year, so there is a sufficient supply available to the market.

4)

October hog futures are poised to break the price resistance, which could increase buying interest.

4)

Futures contracts for October and beyond have been in a sideways range for some time and are expected to continue. The markets can remain unsettled.

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For our next Livestock update, please visit our noon Livestock Comments between 11:00am and 12:00pm CST. Also, follow our Quick Takes throughout the day for regular updates on the futures markets.

Robin Schmahl can be reached at [email protected]

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