Cattle: Mixed Futures: Steady Live Equiv: $137.06 -0.94*
Hogs: Mixed Futures: $1 Higher Lean Equiv: $ 73.51 +0.81**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Light-to-moderate trade developed in all areas late last week with prices steady to firm from the previous week. This movement should limit the need for packers to step back into the market early in the week and gain access to cattle to fill short-term procurement levels. But packers are still expected to remain short-bought, which seems to be a generally normal position for them most weeks. The cash market focus is expected to be placed on inventory-taking and showlist distribution with most trade likely by midweek or later. Futures activity is likely to remain mixed with follow-through support from Friday likely to be reestablished, although the tone of the market is sluggish, which could allow for moderate pressure in several contract months through the morning Monday.
Follow-through cash market support is expected to slowly but firmly move into the complex Monday following the sharp market surge in cash hog values Friday afternoon. This may rekindle additional buyer support in futures trade, although the overall lack of direction in the market Friday could keep markets mixed during initial trade once again. The focus on longer-term fundamental market direction is expected to be curbed by concerns of ample pork product available to the market at this time. This may limit strong follow-through support in all areas.
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Strong gains, which developed late last week, is helping to bring additional underlying support into nearby and deferred contracts. With April futures trading at $119 per cwt, spring 2019 contracts continue to hold a $10 per cwt premium on spot month contracts as traders continue to paint the picture of still strong beef demand through the winter and spring months.
Weakness in boxed beef values at the end of last week is creating additional underlying concerns through the cattle complex. Although underlying demand is expected to remain firm through most of the fall, the concern that additional pressure may develop is weakening the entire complex.
Firm cash buying support last week is helping to spark additional interest through all cattle market trade. This may help to spark some additional early-week bids in order for packers to gain access to cattle through the week.
Additional trade war and tariff issues continues to create some underlying pressure in all markets. The cattle complex remains generally stable, but uncertainty remains as Trump has mentioned trade issues with Japan as an area to look at. This could potentially raise a lot of different issues in all segments of trade.
Strong cash hog gains through the last couple of days is helping spark some underlying buyer support through the entire complex. The focus on potential additional gains during the month of September could help to regain cash market support in the near future.
Sharp cash hog values through the end of last week had little to no impact on helping to spark increased buyer support in the lean hog complex Friday. This may bring about some increased market volatility through the entire complex Monday.
Front-month October lean hog futures have rallied $6 per cwt in the last week. This has created increased market support during early September, with traders focusing on the potential of drawing even more underlying support back into the complex over the next few trading sessions. The strong previous rally is now targeting August highs of $58.60 per cwt in October contracts. A move above this level could draw additional commercial support back into the complex on a long-term basis.
Aggressive premiums in summer 2019 contract months have allowed for additional concerns about short-term market interest developing in the complex, placing even more emphasis on the current supply of production and eroding demand through the end of the year.
Rick Kment can be reached at email@example.com
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