Even though just a few cattle were sold Tuesday in Iowa, the cash cattle market remains essentially at a standstill with bid and asking prices not yet fully defined. Asking prices are expected to be $120 and higher live and $192 dressed. There is increased focus on outside market direction as the sharp losses in energy trade and the stock market through the day Tuesday has created nervousness through all commodity markets. Active cash trade is not expected until late Thursday or sometime Friday, but packer interest may start to increase over the next day or two. Futures trade is expected to firm during early trade, allowing increased buyer activity to pick up where traders left off on Tuesday. This may add some additional underlying support to the entire complex.
Early cash bids on Wednesday are expected to besteady to $1 per cwt lower with most bids to be steady to 50 cents per cwt lower. Total trade activity through the morning is expected to be light to moderate given the overall pressure in futures trade during the week. Lean hog futures should remain mixed during initial activity with follow-through selling pressure being offset by short-covering during the first few minutes of trade. The tone of the market remains extremely weak, whichcould lead to additional pressure later in the session. Traders are also focusing on outside market direction through the last half of the week, as the next few trading days may be the most actively traded sessions before the end of the year due to upcoming holidays. Total slaughter schedules for Wednesday are expected to be around 477,000 head. Saturday runs are expected at 352,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Firm underlying support is building in nearby live cattle trade. Strong triple-digit gains in February futures have pushed prices to $122.57 per cwt. This is quickly narrowing the gap between contract highs set in October at $123.75 per cwt. Continued moves toward this level should build additional buyer support.
| 1) |
Limited cash market activity is expected to develop through the end of week with packer interest still unwilling to step back into the market until late in the week.
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| 2) |
Firm fundamental support is developing through beef values with Select cutout values posting 97-cent gains Tuesday, adding additional underlying support to the entire complex.
| 2) |
Early estimates for the upcoming Cattle on Feed report expect overall cattle on feed as of Dec. 1 to remain near 102%. The full range of estimates is 101.1% to 103.2%, with the average estimate pegged at 101.8%. This may curb midweek buyer support in cattle futures as traders try to adjust to the upcoming Friday report.
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| 3) |
Packer margins continue to expand through the month of December, helping to build additional momentum with the expectation that additional price support will develop in both pork and cash hog values through the end of the year.
| 3) |
Pork cutout values Tuesday have remained lethargic despite active buyer support in butt, picnic and rib markets, each of which posted triple-digit gains.
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| 4) |
Continued long-term demand is expected in pork values with the lean hog futures spread narrowing between front-month February futures and summer contracts. July and August futures continue to hold price levels above $82 per cwt, putting the focus on aggressively moving additional product through the upcoming months.
| 4) |
Strong market pressure has continued to develop across all lean hog futures. Nearby losses of $1 per cwt or greater Tuesday have pulled price over $5 per cwt lower in the last two weeks, sparking additional market pressure.
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| #chh |
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