Cash cattle trade late last week remained mixed when trade finally developed on Friday. Trade in the North sold at generally $1 per cwt higher, with most sales at $108 per cwt. Southern trade traded steady to $1 per cwt lower than the previous week. The slaughter reductions at the Cargill plant in Kansas still dark at the end of the week, limiting the cash cattle market in the area on a short-term basis. The current expectation is that the plant will be operational this week with reports pointing to early in the week. Even with two plants down in Kansas at this point, the fact that cattle supplies have backed away from fall highs, should limit the long-term pressure in the market given that the Cargill plant is able to resume production in the near future. Futures trade slipped lower Friday as traders continue to focus on a potential correction developing following the strong upward market shift over the last six weeks. It is uncertain if traders will remain content with the moderate pressure developing in live cattle trade Friday, as trade may wander within a narrow-to-moderate range the next couple of weeks. The ability to move and hold prices above $114.50 per cwt in December contracts would be needed to help stimulate additional long-term buyer support through the cattle complex. Feeder cattle futures led the market lower late last week with the same cautionary focus on traders looking for a light-to-moderate price correction. The increased availability of young calves on the market through the next month will continue to add uncertainty to the upward support in feeder cattle trade through the end of October. Monday slaughter runs are expected at 113,000 head.
Mixed trade is expected in the lean hog futures trade as trades continue to remain uncertain of short-term movements of pork to export markets. Friday's weekly Export Sales report was a head scratcher, as the report posted the most pork exports sold in one week since the report started. But a later release of a USDA statement said unreported sales from previous weeks added even more confusion. The market really never took hold of the aggressive numbers and eroded through the session Friday. The unusual developments and market erosion Friday is expected to leave many traders searching for direction and additional clarity through the first part of the week. This should leave lean hog trade mixed with moderate-to-wide price shifts possible through the first half of the week. Cash hog values are expected to be $1 lower to $1 per cwt higher, with most bids expected steady to 50 cents lower. Expected slaughter Monday is at 487,000 head.
| BULL SIDE | BEAR SIDE | ||
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Supply tightness during the first quarter of 2020 is expected to still leave markets focusing on long-term price support during the end of the year and early next year.
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The continued lack of production at Cargill's plant in Kansas will limit overall procurement levels. Although the plant is expected to be operational sometime this week, the uncertainty will weigh on the market.
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The market correction that started developing Friday is creating some relief to the market as traders expected a break from the aggressive move higher at some point in the near future. If correction losses can remain limited in the upcoming days, buyer interest is expected to be rebuilding for long-term gains.
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The break lower in futures prices Friday may spark continued early-week selling. Although traders remain optimistic about long-term support, the price correction may erode some of the interest that has been redeveloping in the last month.
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Even if the large export sales of pork may not have been for current week levels in Friday's report, the focus on increased sales over the previous weeks, or months is still a good sign that active trade is developing in not only China, but also Mexico and Japan.
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Continued uncertainty with China trade remains to be a cloud over the entire lean hog complex in the near future. Traders are looking for new information on the ability to continue the trade talks through the end of the year.
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Firm price support continues to develop in wholesale pork values while there are moderate-to-firm gains in cutout values at the end of the week.
| 4) | Hog supplies remain abundant, leaving additional pork supplies to be put into storage through the end of the year. The concern is that seasonal demand pressure may limit the movement of these inventories and limit the recent support in futures trade. |
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