Given the continued bearish market direction in cattle trade, cash cattle interest is expected to remain at a standstill through the first couple of days this week. Showlist distribution and inventory taking is likely to be the extent of any cash market information seen during the week. Now that we have a complete week in the books following the Tyson plant fire, it will be interesting to monitor and watch daily slaughter numbers. I would expect that overall numbers would be steady to higher than last week's levels, which may eliminate some of the overall pressure from causal market watchers and some noncommercial traders. Especially since "year-ago slaughter numbers" give us a less complete picture due to the overall changes in market structure over the last year. Firm pressure last week has caused live cattle and feeder cattle to remain generally oversold. This is expected to spark additional potential for moderate-to-firm gains through the week, although the renewed bearishness in hog trade is likely to limit upward movement.
Sharp limit losses in spot October lean hog futures sparked additional technical pressure in the complex. This not only moved prices to year-long lows in October contracts, but opened the door for additional technical selling over the near future. Long-term support remains near $58 per cwt, which is still another $4 per cwt lower than current levels, but with expanded limits available and continued concerns of weak pork demand and uncertain trade issues with China, losses like this are reachable. The lean hog futures complex is could expand the discount to cash values, likely adding additional fundamental pressure to the complex. Cash bids are expected steady to $3 lower with most bids $1 lower. Expected slaughter Monday is at 474,000 head.
| BULL SIDE | BEAR SIDE | ||
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Given the active Saturday plant runs, beef packers increased plant output from week-ago levels even without the Kansas Tyson plant. An estimated 7,000 head increase from week-ago levels should help to keep cattle supplies current despite the limited plant space.
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Continued pressure in live cattle and feeder cattle trade has limited additional buyers moving back into the complex. The underlying pressure may spark additional market weakness, holding nearby contracts under $100 per cwt.
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Sharp triple-digit gains continue to develop in boxed beef values. Continued concern about packer capacity is sparking underlying wholesale buying, which is quickly improving packer margins.
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Renewed buyer support quickly developed in corn trade late last week. The focus is moving away from USDA's latest crop projection levels and onto other sources such as the DTN/Progressive Farmer 2019 Digital Yield Tour last week and other on-the-ground surveys over the near future.
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There is limited pressure in deferred lean hog futures trade. June contracts currently hold a $21 per cwt premium to spot contracts, allowing not only long-term support but potential to remain in the complex long term.
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Late-day pressure flooded lean hog futures Friday. Sending October futures limit lower as renewed technical pressure quickly redeveloped. This may create additional long-term weakness in the complex as traders struggle to find technical or fundamental support in the near future.
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Firm cash hog markets have put the focus on the need and ability of packers to aggressively source hogs in order to meet daily plant requirements. This is helping to maintain an aggressive premium over futures trade, and may help to stabilize the complex.
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Wholesale pork prices have been unable to show significant improvement or even signs of life the last few days. This may add even more uncertainty to the complex as trade and recession concerns continue to grow.
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| #completeherdhealth |
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