Packer interest is expected to become more active as the day progresses Thursday, although at this point, it is uncertain if active trade will develop Thursday or be held over to Friday. Asking prices remain firmly planted at higher levels of $104 to $105 live basis in the South and $170 in the North. The expectation is that any initial bids in the market will be a far cry from current asking prices, leaving a strong gap for negotiations to fill over the next couple of days. Overall market-ready cattle supplies appear to be starting to tighten from the previous week's levels, although it will still be some time before packers see enough of a pinch in supplies in order to actively negotiate access to cattle. With the end of September quickly approaching, it is also uncertain just how active packers will be given increased contract deliveries set for early October. Futures trade is expected to focus on the uptick in the complex as traders continue to focus on expected short and long-term demand building through the complex while expanding the bullish market trend in the last two weeks. December futures have currently rallied $9.50 per cwt above August lows, as increased fundamental support also helping to stimulate technical gains.
Strong renewed support has moved into the lean hog complex through the week with increased bullish market expectations being built as traders focus on the potential for increased China trade to develop. Reports continue to circulate of China in the market to purchase as much as 100,000 metric tons of pork. This helped to stimulate additional buying activity. An announcement by Chinese ministry spokesman that Chinese buyers have "completed deals to buy soybeans and pork of considerable scale" should continue to spark positive support in nearby contracts. Cash hog values are expected steady to $1 per cwt higher, with most bids expected steady to 50 cents higher. Expected slaughter Thursday is at 487,000 head. Saturday runs are expected near 258,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
The trade agreement with Japan continues to be an underlying bullish market shift for beef demand through the end of the year. Although this agreement will have more of a long-term impact rather than immediate price relief, it continues to help grow the movement of beef products to global markets with reduced tariffs.
| 1) |
Beef values have continued to struggle through the week with limited support the last couple of days. This suggests that some wholesale market pressure may continue to develop despite firm futures gains in order to regain active retail product movement.
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| 2) |
Strong underlying support in live cattle futures should help to stimulate higher cash cattle trade through the end of the week. Given the expectations that cattle supplies will continue to tighten in the near future, upward cash movement is likely to become more evident and common.
| 2) |
Feeder cattle futures have been unable to maintain the level of buyer support in live cattle trade. Although underlying support is still developing, the expectation that additional cattle numbers are moving to market over the coming weeks will likely limit the upside market support.
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| 3) |
The announcement by a Chinese spokesman Thursday that China has completed purchases of "considerable amounts" of pork and soybeans is helping to stimulate additional support to the entire lean hog complex.
| 3) |
Deferred lean hog futures have been unable to keep pace with the recent and aggressive gains in nearby lean hog futures. This continues to signal market uncertainty surrounding continued market growth. Much of this market hesitancy is based on lack of a long-term trade agreement with China.
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| 4) |
Even though the trade deal with Japan has the most focus on beef, the impact of lower tariff levels will also help to stimulate additional pork supplies. Japan is a major importer or U.S. pork, and this is expected to spark additional movement of pork to Japan.
| 4) | Strong market gains through the week are opening the door for a light-to moderate market correction. With the lean hog market so dependent on headlines over the last few months, overall market support is only as strong as the next news release concerning China trade deal talks. |
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