Interest in cash cattle markets is expected to remain subdued early Monday morning with both sides watching from afar at this point following the combined pressure last week in futures and cash cattle trade. Activity is expected to be limited to showlist distribution and inventory taking. Following last week's holiday, both sides are gearing up for a full week of trade and procurement levels. It is expected that daily slaughter levels will near 116,000 head. At this point with the Holcomb plant still idle from a slaughter prospective, daily totals of 116,000 to 117,000 appear to be the new normal, with additional plant runs on Saturday making up the balance of cattle still needed. Sharp losses in futures trade Friday has quickly sparked long-term market concerns. October futures traded at the lowest point in nearly three years, but closed below the 2016 lows in front-month continuous charts. This is likely to add technical weakness, but the weekend break may have brought a "calming effect" to the market.
Lean hog futures remain weak leading into opening bell Monday morning following limit down trade Friday afternoon. The extremely weak market structure and additional technical pressure will allow for expanded trading limits Monday morning, which is likely to add even more volatility to the entire complex. News reports that the Chinese government will help fuel additional subsidies in order to increase overall pork production in China should be no surprise to the market, but seemed to have a major impact in price levels Friday. Although African swine fever continues to be a major issue through the country, it is helpful to remember that China has made conscious efforts over the last decade to become as self-sustaining as possible in the pork industry, and this long-term strategy is not expected to change. If anything, African swine fever will create a stronger desire to not rely on outside production long term, and also change the scope of practice in the country to even more industrialized and commercial production levels than before the latest production losses. Cash bids are expected $1 to $2.50 lower with most bids steady to $1.50 lower. Expected slaughter Monday is at 479,000 head.
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Live cattle futures remain oversold given the aggressive late-week losses in October live cattle trade.
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Expanded trading limits of $4.50 per cwt are available in live cattle trade. Given the recent technical pressure, this may spark additional active pressure Monday morning.
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Despite the pressure in nearby trade, deferred contracts appear to be holding well with traders focusing on additional supply tightness and continued long-term demand in the spring of 2020. This may add long-term stability to the entire complex.
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Cash cattle trade remains weak given the inability to rebound significantly over the last month despite limited overall production losses and aggressive gains in beef values. This may add increased concerns with strong cattle supplies remaining and long-term pressure holding across the complex.
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Active gains developed in pork cutout values Friday. This is helping to move the emphasis away from pressure in futures and cash markets, and help to focus on upcoming demand growth expected in pork complex.
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Cash hog values remain weak given the continued pressure in pork values over the last two weeks and continued softness in futures trade.
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Traders are not giving up all hope that progress may develop in the planned upcoming October trade talks. Any progress for long-term resolutions will be a good signal, and likely to get the market's attention given the recent bearishness in the complex.
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Expanded trade limits is expected to allow additional volatility through the complex Monday morning. The general weak market structure combined with trade concerns and still strong hog supply levels may add increased weakness through the entire complex.
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