Packer interest is expected to remain sluggish early Thursday morning, but overall activity will likely improve as the day goes along. Even though more packer bids are expected to be available, this has the potential to put even more pressure on the entire cash market. A few cash deals took place Wednesday in Nebraska with trade mostly at $167 per cwt dressed basis. This is generally $4 per cwt lower than last week's levels. Given the holiday Monday and overall lower expected procurement levels, packers are not expected to need to fill significant order levels given that overall trade the last three weeks has remained limited. This is causing an additional backlog through the market with estimated market-ready cattle still growing through the next couple of months. The announcement by Tyson's CEO Noel White, Wednesday that the Holcomb plant will likely be back online by January gives a sense of direction to the industry. The fact that a projected date was given was a good sign as it helped lessen the uncertainty. White also stated that some processing has already resumed in unaffected portions of the plant. Although this is not expected to create significant short-term market impact, it is likely to help to rebuild buyer confidence through early 2020 contracts and add a sense of stability to the market. Futures trade is expected to remain mixed Thursday morning as traders assess potential pressure in cash trade while showing limited short-term direction in spot month contracts.
Lean hog futures are expected mixed following what is considered to be a generally disappointing move midweek following limit gains on Tuesday. The focus on position-squaring that developed through most contracts midweek took the emphasis off of renewed buyer support moving back into the complex, although traders are looking for potential technical support through early September. Continued large hog processing schedules and ample market-ready hogs are limiting fundamental support as cash hog and pork values continue to erode lower. Cash bids are expected steady to $2 lower with most bids steady to $1 lower. Expected slaughter Thursday is at 484,000 head. Saturday runs are expected near 363,000 head.
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The announcement Wednesday that Tyson plans on having the Holcomb plant back online by January and some processing has already resumed in unaffected areas of the plant helped to give a better timeline after a month of reduced procurement schedules.
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Continued pressure in cash cattle trade is expected to create additional underlying pressure through the entire live cattle complex.
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Strong gains in feeder cattle futures has continued to spark the attention of cattle markets. Fueled by continued corn market pressure, this is helping to regain market momentum in nearby and deferred futures contracts.
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Beef values have started to erode through the week. The inability to hold last month's gains is not a surprise, the impact of higher retail beef values and post-holiday lull for beef demand is expected to add even more pressure on boxed beef values in the near future.
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October lean hog futures shifted higher midweek, confirming limit gains early in the week, and is creating additional underlying support.
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Although moderate hopes of export trade results to China remain in Friday's export sales report, traders expect limited if any overall movement to the country despite China's high priced pork and need for product.
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The announcement that trade talks between the U.S. and China are expected to take place in Washington sometime in October and that both sides are expected to help lay the groundwork for these talks over the next few weeks is creating some hope that progress may be made in trade relations.
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The impact of hurricane Dorian is still uncertain on overall hog processing, but the storm will likely create disruptions in plant schedules and moving hogs to market through the Southeast. But right now it is still uncertain how big of an impact this will have on the entire pork system.
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