Active triple-digit gains Tuesday afternoon have changed the tone and direction of the market. This move elevated contracts off of contract lows with December and February futures leading the complex higher with gains over $2 per cwt. There is pressure in the complex due to seasonal beef demand slowing and ample cattle in the pipeline the next couple of months, which will limit aggressive market support. The oversold cattle market may have reached bottom, giving buyers who have been waiting on the sidelines an opportunity to quickly step into the complex, changing the overall direction of the complex. Cash cattle activity is expected to show limited direction Wednesday morning with packers and feeders likely to be slightly more active as the day continues. Even though bids may start to trickle into the complex, trade may easily be delayed until Thursday or Friday as both sides appear to be set on changing the direction of the cash cattle market in their favor given the volatility over the last week. Cattle slaughter is expected to remain at 117,000 head Wednesday.
Mixed direction is expected in the lean hog complex Wednesday morning. Although there is some renewed optimism about the potential of a trade deal with China as both sides prepare for the upcoming meetings next month. News reports early Wednesday said China will go ahead with current tariffs on pork, soybeans and other products while rolling back tariffs on other imports. This will likely take a negative toll on the hog complex Wednesday morning because it indicates that China is continuing to measure the amount of impact tariffs is having on its slowing economy but is unwilling to give up pressure on ag products. Ag products are one of the major pressure points that China has in the current trade war. The volatile nature in lean hog futures through the summer and fall suggest that additional wide market swings will continue to develop in the near future. Cash bids are expected steady to $2 lower with most bids $1 lower. Expected slaughter Wednesday is at 484,000 head. Saturday runs are expected at 192,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Strong triple-digit gains in all live cattle trade is giving the complex new life. This move off of contract lows, is moving buyers back into the complex.
| 1) |
Wholesale beef values continue to steadily erode from the elevated status over the last month. This will slow any sizable recovery in futures and cash cattle trade the next couple of weeks.
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| 2) |
If recent gains can hang on, they will help support cash cattle trade through the end of the week, but additional gains will be needed to establish an upward market trend. The aggressive moves Tuesday are an excellent start.
| 2) |
Despite the strong triple-digit rally Tuesday, fundamental market weakness continues. With large cattle supplies and overall beef demand slowing, upside market potential remains limited.
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| 3) |
Expectations that the October meeting between the U.S. and China will result in a trade deal helped rekindle support Tuesday.
| 3) |
Trade relations with China remains volatile. This may add even more uncertainty given the wide market swings seen Tuesday.
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| 4) |
Despite continued uncertainty about export pork demand, domestic movement continues to keep the market generally current.
| 4) |
The fact that China did not list pork as one of the products where tariff levels have been rolled back, shows their hardline approach and commitment to do all they can to purchase pork elsewhere, even though pork supplies are tight in the country and their pork prices are escalating.
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