Cash cattle activity remains undeveloped early Wednesday morning witha few token bidsin the north Tuesday unable to bring any direction to the market. Asking prices are generally undeveloped, but are expected around $118 and higher live basis and $187 dressed. Packer interest is expected to improve throughout the day, although this is not likely to spark much trade unless active movement develops in the futures trade. Bids will likely to be restated near $183, similar to where bids were Tuesday. Most of the cash trade is likely to be pushed off until later in the week, as traders focus on the long-term direction. Futures trade is expected to redevelop following aggressive market support in nearby live cattle trade and deferred feeder cattle markets late Tuesday. It is uncertain just how much follow-through buyer support will develop midweek, which could allow for the development of short-covering, especially if widespread outside market pressure develops as the trading session continues.
Initial early bids Wednesday are likely to be steady to $1 per cwt lower with most bids pegged steady to weak. The ability to gain access to needed procurement levels, and the availability of market-ready hogs, is allowing packers to keep prices in check through early December. Although, with hints of growing demand support through the next couple months and long-term market changes, the focus on current hogs in the system will limit the upside market potential. The back and forth movement in lean hog futures is adding even more uncertainty to the market as traders over the previous two sessions seemed to follow the pendulum swing surrounding high hopes and uncertainty with any developing China trade. Markets are expected to react to not only new information, but trader conjecture as to what these changes mean. At this point, there seems to be more "hope" in the market than actual solid agreements on what will happen in both short-term and long-term trade. Most of this seems to hinge on what "substantial buying" there is as this can mean different things to different sectors of the market. Total slaughter schedules for Wednesday are expected to be around 477,000 head. Saturday runs are expected at 220,000 head.
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Active buyer support has moved back into the cattle complex early in the week as the focus seemed to move away from trade in the China market and more focus on firming domestic activity and demand support in other areas of the world.
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Despite the narrow move higher Tuesday in nearby feeder cattle futures, the eroding market has broken through short-term support levels in November and officially broken out of the sideways trending market through the last several months. This creates concern that downward market pressure may continue to develop through the end of the year.
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Triple-digit gains in nearby live cattle futures has helped to further distance price levels away from short-term support levels in November. This is likely to spark additional commercial buyer support into soon-to-be spot-month February contracts.
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Continued buying in grain markets following the potential for increased global trade exports is adding pressure to feeder cattle futures, which are highly sensitive to moves in corn prices. Additional corn market support could spark further selling in all livestock trade.
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Firming pork cutout values has allowed for increased buyer support to develop through the week as traders focus on sustaining demand during early December. This may bring some much needed stability to the entire complex in the upcoming weeks.
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Lack of consistency in boxed beef values though early December is creating questions of follow-through buyer support in the cash and futures trade. This may limit short-term support based on recent volatility across the market.
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Strong market premiums continue to hold in summer 2019 lean hog contracts with traders expanding the premium over front-month December contracts to $27 per cwt. The focus on the potential of growing export demand is adding stability to long-term price levels.
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Sharp losses in the stock market Tuesday pushed the Dow Jones Average Index 799 points lower while Nasdaq fell 283 points. This represents an unsettling tone in all markets due to concern that domestic and global economic growth may be shaky through the coming months. This is expected to limit further noncommercial support in livestock markets, including the lean hog complex.
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