Packer interest is expected to increase through the day Thursday with asking prices and bids still holding a moderate-to-wide gap. Initial bids are expected to redevelop in the same range as Wednesday afternoon with live bids at $106 and dressed bids at $168 to $170 per cwt. Active trade may be delayed until sometime Friday, although it would not be surprising if there is some limited trade before late-day Thursday. Futures are expected to open higher with follow-through support developing in the complex. Although the aggressive market shift does open the door for positioning and may spark some market volatility through the next couple of days.
The impact of Hurricane Florence is going to continue to be the focus of the hog market over the next few days. With the amount of hog production and processing capacity in the affected areas, this could have a significant impact on both short- and long-term hog supplies. Cash markets are expected to see some additional market support as packers aggressively look for market ready hogs to fill procurement lines. Triple-digit gains in nearby lean hog futures seemed to be focused on keeping pace with the rest of the livestock complex as traders held uniform gains in all nearby contracts. This underlying support that seems to be developing may help to spark some additional longer-term support through the complex.
| BULL SIDE | BEAR SIDE | ||
| 1) | Buyers quickly and aggressively swept back into the entire cattle complex midweek with increased overall support through the complex. The ability to sustain this market support through the end of the week will add even more momentum to the complex. | 1) | Despite the midweek rally in futures trade, beef values remain less than enthusiastic through the week. With very limited underlying support developing in cutout values, it appears that wholesale beef prices may struggle to show significant support over the near future. |
| 2) | October live cattle futures have posted September highs with a close at $111.47 per cwt Wednesday. Additional firm buyer support through the end of the week, moving above $112 per cwt would break through August resistance levels. This would move October contracts to the highest price levels since March, leaving the potential for strong follow-through buying in the next few weeks. | 2) |
With the strong triple-digit rally seen in nearby live cattle futures, there is now more focus on the potential to spark widespread market swings through the complex. This added volatility in the market could quickly evaporate recent gains through the end of the week.
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| 3) |
Continued strong cash market support continues to develop across the entire complex. This is leaving additional focus on the potential for further market growth as packers continue to fuel aggressive plant production levels.
| 3) |
Hurricane Florence has the potential to be devastating to the overall movement of hogs and production levels with the Eastern Seaboard production and processing levels being heavily impacted by this storm. It is likely that plants in the area will remain dark through the end of the week at least in preparation for the hurricane, while no one at this point knows what the end result will be after the storm passes.
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| 4) |
The long-term impact of Hurricane Florence is still unknown as it nears the North Carolina Coast. But the potential to impact hog production levels in that area could create long-term supply issues. This may significantly impact futures and cash prices moving forward if there is significant hog deaths.
| 4) |
Even with strong support in nearby futures trade, there has been little change in price spreads. Nearby lean hog contracts continue to hold an aggressive $25 per cwt discount to summer price levels, as traders continue to discount current supply levels while demand uncertainty continues to be realized.
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