Cash cattle business is essentially dead in the water going into Thursday morning. Although a few cattle were sold Wednesday afternoon, there were not enough sales to establish a market trend. Packer interest is expected to redevelop through the morning although trade may not develop until late Thursday or sometime Friday. Cash markets remain stuck between the strong rebound in futures trade the last two sessions, while pressure in wholesale beef values has continued to shift through the complex. Although packer margins still remain attractive that won't deter increased plant speed any time soon, but upward movement is likely in cash overs. Futures trade is expected to remain firm early in the session with follow-through support likely. But the aggressive market shift the last two trading sessions is also creating some position-taking opportunities for many traders. Cattle slaughter is expected to remain at 117,000 head Thursday.
Strong pressure on Wednesday continues to pivot on the "will China buy or not buy pork" question that has been leading the complex on this wild and unpredictable roller coaster the last several months. Recent news that importers in China have inquired about pork and soybean prices ahead of the upcoming talks may be just enough fuel to spark buyers interest once again, although the pressure in the complex remains well rooted in fears that tensions will continue to build over the near future. Cash bids are expected steady to $2 lower with most bids $1 lower. Expected slaughter Thursday is at 482,000 head. Saturday runs are expected at 192,000 head.
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Active futures gains developing Wednesday helped to confirm renewed support moving into the complex. Traders are focused on the ability to potentially set seasonal lows as traders distance themselves from contract lows set early in the week.
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Sharp losses in beef cutout values once again bring the market back to reality that the surge in wholesale beef values in the last month was overdone and has limited demand.
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Active open interest gains are expected to develop through the week, indicating that traders who were setting on the sidelines until markets stabilize have started to filter back into the complex.
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Limited support is developing in cash cattle trade with packers unwilling to bid for cattle as they protect their large margins.
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The planned upcoming trade meetings with China is thought to bring some much needed direction and developments concerning trade relationships with China. Traders are putting a lot of hope on the fact that this may move the ball forward as both sides desire a resolution.
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Continued short- and long-term concerns surrounding the ability to move pork to China is creating pressure through the complex. This may post further losses through the rest of the week, especially if export sales to China in Thursday's report remain disappointing.
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Expected long-term gains in pork demand is expected given the wide market spread between spot prices and deferred contracts. Summer 2020 contracts are trading at a $20 to $25 per cwt premium to current markets, allowing the expectation that long-term market direction illuminates a better market picture.
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Cash hog values continue to tumble lower with packers having little incentive to increase prices as they are able to fuel the aggressive plant speeds at lower price levels due to the growing availability of market-ready hogs at their disposal.
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| #completeherdhealth |
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