Cash cattle trade for the week remained higher in all areas with prices moving $2 to $5 per cwt higher, depending on the areas impacted. Southern trade remained at $103 per cwt, $2 per cwt higher than last week, while northern trade was seen mostly $165 dressed, $3 higher, and $106 to $107 live, $4 to $5 per cwt higher. This is expected to spark optimism in the upcoming week, although Monday's activity is expected to be limited to showlist distribution and inventory taking. Active trade is likely to be pushed off until later in the week, which is also placing any expected trade into the month of October. Futures trade is expected mixed in light-to-moderate trade as traders continue to build on the moderate-to-strong rally that developed last week. Nearby futures prices are now trading at the highest level since early August, as December contracts are testing $111.45 resistance set on Aug. 9. A move above these levels before the end of the month should help spark additional bullish technical support moving into the month of October.
Early trade is expected to remain generally weak with nearby contracts focusing on the increased hog numbers on Friday's Hogs and Pigs report. The USDA announced that as of Sept. 1, there were nearly 77.7 million hogs in the U.S. hog production system. This is not only 3.4% over year-ago levels, but well above re-report estimates through the country. The overall inventory level is expected to be viewed as bearish, at least in the short term on the market and for nearby contracts. The positive news in the market was seen in farrowing intentions with December through May intentions near stable with the previous year. This would limit the upside momentum of overall hog production long term and is expected to create longer-term support through the complex. Little news has developed surrounding the trade talks with China that are expected to take place sometime next week. The anticipation of positive developments is helping to contain previous market support in lean hog trade, although the uncertainty in the complex may cause futures pressure through most of the morning. Cash hog values are expected steady to $1 per cwt higher, with most bids steady to firm. Expected slaughter Monday is at 483,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Strong cash cattle trade last week is expected to spark increased expectations of further market gains during early October.
| 1) |
The Aug. 9 futures prices continue to remain the test of breaking out of recent market pressure. December futures are nearing these levels before Tyson's Kansas plant fire, but the uncertainty of early week buyer support breaking through this threshold may limit early day support.
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| 2) |
Active support late last week in nearby live cattle futures is helping to stimulate buyer interest. This is helping to put the focus on continued long-term support across the cattle complex.
| 2) |
Beef values have been unable to show significant support through the end of last week despite strong gains in futures and cash markets. Although packer margins still remain extremely attractive, packers are going to try to defend these margins as much as possible during early October.
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| 3) |
Wholesale pork values are hoping for overall market support going into the fourth quarter of the year, as the summer buying season passes and product focus moves from ribs and bacon, and back to ham and more expensive prime pork cuts through the end of the year.
| 3) |
Larger-than-expected hog supplies as of Sept. 1 on Friday's Hogs and Pigs report is expected to create confirmation of the abundant availability of pork yet to hit the production system. This is likely to erode previous support through the complex.
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| 4) |
Continued focus is being placed on the upcoming trade talks with China. This is expected to spark potential market support as the need to supply China remains evident, but a strong agreement will be needed in order to secure the desire for China to return to the U.S. for more of its pork supplies.
| 4) | Larger-than-expected hog supplies as of Sept. 1 on Friday's Hogs and Pigs report is expected to create confirmation of the abundant availability of pork yet to hit the production system. This is likely to erode previous support through the complex. |
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