Cash business finally developed in the South Friday evening, with another strong upward shift developing in cash cattle trade. Northern trade developed earlier in the day Friday with trade from $170 to $172 per cwt, mostly $172 per cwt and generally $2 per higher from the previous week. Southern trade was much more sluggish to develop with feeders holding tight to elevated asking prices until after the futures market close. This helped push prices $1 to $3 per cwt higher from the previous week with prices at $108 to $109 per cwt through the South on a live basis. Due to the late nature of trade, it is still uncertain just how many cattle were sold in these areas, which will be reported Monday morning. The continued bullishness in cash cattle trade over the last month is helping to return the focus on tighter market-ready cattle supplies ahead and likelihood that additional gains may develop through the end of October. Futures trade is expected mixed early Monday following a consistent but strong market really that ended the week. With prices holding gains of 70 to 77 cents per cwt in all nearby contracts at the end of last week, the focus on continuing the market rally over the last month will once again be the focus. Currently December futures have pushed above $112 per cwt, for the first time since early August and have posted a rally of nearly $13 per cwt since September lows. Traders are becoming much more confident that the seasonal lows are behind us, with continued focus on manageable supply levels through the end of the year. Monday slaughter runs are expected at 117,000 head.
Early market trade remains uncertain as traders have had the weekend to mull over and analyze the announcement of the "Phase 1" trade deal that was announced. Although the deal would focus on strong sales of agricultural products to China, the details of what this would include and timeline of these sales are still not readily available, and may not even be ironed out. Reports early Monday that China says it wants more talks before signing such an agreement, which is creating some concerns that it may not be as optimistic as thought late last week. Although this part of the deal would delay new tariffs set to be implemented on Oct. 15, there are still major hurdles that broke down talks early in the year that seem to still be looming over the ability to move ahead with a long-standing trade agreement. In the livestock markets, the pork complex will continue to have the greatest impact on trade talks. No matter if a trade deal is passed or not, it should not be forgotten that China continues to struggle with pork supply and the impact of African swine fever. It is expected that they will need to purchase pork over the next several months. But the willingness and amount of pork that they purchase will likely significantly increase if trade agreements are in the works, and both sides keep talks alive. Cash hog values are expected to be steady to $2 per cwt higher, with most bids expected 50 cents to $1 per cwt higher early Monday morning. Expected slaughter Monday is at 481,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Active cash cattle gains developed late Friday. This moved prices $1 to $3 per cwt higher through most of the South, while Northern trade settled generally $2 per cwt higher for the week. This continues to push prices higher and create expectations of further support through the week.
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Limited trade is expected in all futures trade due to Columbus Day keeping government and financial institutions closed. Typically futures trade remains light on holidays, even though futures trade will remain on a normal trading schedule.
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| 2) |
Continued upward movement in nearby live cattle futures trade has pushed December futures to a 2 1/2 month high at $112.15 per cwt. This strong upward shift is focusing on working out of the supply glut the last couple of months with additional relief expected the next several weeks.
| 2) |
The strong double-digit rally in live cattle futures since the seasonal low on Sept. 9, has been generally unchecked. This is leaving the market ripe for a light-to-moderate market correction the next couple of weeks, as traders adjust current positions.
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| 3) |
The announcement Friday afternoon that a partial trade deal had been reached is expected to continue to add market support to the entire lean hog complex. This should spark some additional buyer support early in the week, even though Monday trade volume is likely to remain limited.
| 3) |
Reports from China Monday morning that "additional talks" are desired before signing the trade agreement reached late last week is likely to create some additional questions of just how likely a potential agreement will be signed in the near future. This brings back flashbacks of how talks became derailed earlier in the year, leading to increased market concerns.
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| 4) |
Lean hog support continues to develop as traders steadily move away from summer lows. December futures have rallied nearly $11 per cwt since the Aug. 19 low, with increased focus on potential trade progress likely to spark increased support over the near future.
| 4) | Continued strong supplies of market-ready hogs through the next two months is still expected to limit the upside market direction in nearby lean hog futures. If trade talks do not continue to move forward in a steady fashion, the focus on burdensome pork supplies through the pipeline will continue to put the brakes on significant market support. |
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| #completeherdhealth |
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