Another Friday has arrived and packers and feeders find the need to get down to business once again. So far this week, packer bids have been sluggish to say the least with limited interest shown over the last few days. The bids that have been seen have been pretty well established well below asking prices. Bids in the North developed at $175 per cwt. This is a good $3 to $5 per cwt below asking prices of $178 to $180 per cwt dressed basis in the South and likely to spark some additional uncertainty about the potential to bring strong end-of-the-week cash market support back to the table before both sides call it good for the week. Asking prices in the South remain at $111 to $112 per cwt, but as bids start developing through the day, they will likely be firmly below these levels. Futures trade is expected mixed with limited expectations of renewed support this late in the week. Feeder cattle futures have led the market correction lower Thursday as air had started to become thin above $145 per cwt. Although the case for continued firm longer-term market support remains, the cattle complex has been ripe for a market correction over the last couple of weeks. It is uncertain at this point if Thursday's action will be enough to satisfy sellers in order to spark renewed interest through either live cattle or feeder cattle trade at the end of the week. Friday slaughter runs are expected at 112,000 head.
Firm pressure continues in lean hog futures trade following the strong underlying weakness through the last few days. December futures led the complex lower Thursday, as limited details concerning last week's partial trade agreement is starting to create overall impatience by many traders and industry analysts. The uncertainty of what any agreement will have on pork, and the vagueness of the timeline as to when things will happen is creating underlying concern in the complex. The strong losses in December contracts took out most of the gains the last two weeks. Prices still remain above firm support of $64.25 per cwt, but a move below these levels would establish new October lows, and create technical pressure through the near future. Continued focus on the current amount of market-ready hogs and hogs in the pipeline continues to limit the upside of the market without a clear indication of how active trade to China will be. Traders will also closely look for China sales in the morning Export Sales report, which was delayed to Friday due to the Columbus Day holiday. Cash hog values are expected to be $1 lower to $1 per cwt higher, with most bids expected 50 cents per cwt higher early Friday morning. Expected slaughter Friday is at 483,000 head. Saturday runs are expected at 280,000 head.
| BULL SIDE | BEAR SIDE | ||
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Firm underlying support in select boxed beef values Thursday continues to put the focus on underlying support for beef values. This will continue to spark some long-term support.
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The plant explosion of a standalone building at Cargill's Dodge City plant is creating additional concerns of processing levels. Although it is unclear at this point if any long-term implications to slaughter numbers will develop, any closure becomes a hot topic lately.
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The delayed activity in cash cattle trade is creating hopes and expectations of firm market support once the dust settles at the end of the day.
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Strong triple-digit pressure in feeder cattle futures has created weakness through the complex with follow-through pressure possible through the end of the week.
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Traders continue to look for positive news in Friday morning's weekly Export Sales report. Increased sales to China at the end of last week would be huge in drawing renewed interest back to the complex.
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Weakness in pork cutout values is causing concerns given the strong pullback in futures trade. This could allow for increased underlying weakness not only at the end of the week, but through late October.
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Limited pressure has been seen in deferred lean hog futures through the latest market pullback. This helps solidify expectations that increased long-term export demand continues to be on the radar of most traders.
| 4) | Lack of export news to China in Friday's Export Sales report will likely be viewed increasingly bearish as traders are looking for increased buying activity the last couple of weeks. Many are looking for this buying to be in the current year. |
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