Livestock traders continue to search for underlying market support following the sharp shift lower last week. This recent pressure has broken through long-term support in lean hog trade, while feeder cattle futures have set contract lows.
Cattle: Steady Futures: Mixed Live Equiv: $141.83 -0.70*
Hogs: Steady to $2 Lower Futures: Lower Lean Equiv: $ 82.32 +0.60**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Limited cash cattle activity is expected on Tuesday with the early-week market pressure limiting overall packer interest during the morning. With showlists generally smaller, it is likely that packers will become more aggressive in searching for market-ready cattle earlier in the week, but the underlying pressure in the market may cause significantly lower initial bids.
At this point, it is uncertain how feedlot managers will react this early in the week. They might hold out for potential market support later in the week, and higher prices, or they could cut their losses if pressure continues to develop through the end of the week, taking advantage of what basis opportunities they currently have.
This could keep cash market activity variable the next few days, but currently bids and asking prices are not yet well defined. Futures trade is expected to remain generally weak. The ability to hold narrow gains in nearby live cattle trade Monday despite the sharp feeder cattle trade, is putting more focus on commercial support trickling back into the complex this week.
With nearby contracts at or near contract lows, the concern of follow-through pressure remains evident for the near future.