Cash cattle activity remains on the back burner through the early part of the week with asking prices becoming more available at $111 to $112 per cwt live basis in the South and holding at $180 in the North. The overall lack of packer bids so far this week is not unusual, but prices should be more available through the day Thursday. Although it is uncertain just how aggressive packers will be until the end of the week, it appears that market firmness should develop given the underlying bullish tone in futures trade so far this week as well as steady gains in beef values. Futures trade is expected mixed in a narrow-to-moderate trading range as the focus will once again return to December contracts as they slowly but steadily continue the bullish shift higher during the week. Even though prices are still have ground to cover before reaching resistance levels set at July highs of $114.35 per cwt, this target is well in sight, and attainable through the end of the week given the steady but measured market support over the last month. October futures remain lightly traded with limited interest, but the strong shift higher Wednesday, quickly narrowed the price spread between October and December contracts, helping to add even more firmness through the cattle complex. Feeder cattle futures are expected to show limited activity early Thursday morning, but outside markets will likely become a major factor late in the week with an increased focus on grain trade and production costs. Thursday slaughter runs are expected at 117,000 head.
Mixed movement in lean hog futures continue to focus on overall uncertainty of trade situations with China. The strong $1.50 per cwt loss midweek was a reaction to previous limit gains in nearby contracts the day before, causing a moderate yo-yo effect through the lean hog complex. Although the trade issues with China will ultimately impact deferred contracts more heavily due to long-term demand implications, it is interesting to note that this latest round of trade issues and hopes for aggressive buying to China is focused primarily on spot-month contracts, leaving the rest of the complex firmly supported but much less volatile. It is uncertain if all of the back and forth announcements and news reports about what both sides appear to be thinking is showmanship in order to impact public decision, or if both sides took away different perspectives from the latest rounds of trade talks. The focus on rising prices of pork in China continue to make headlines as the impacts of African swine fever continues to be a major issue through the entire region. This will likely provide direction through the upcoming weeks as China will need access to more pork supplies. Cash hog values are expected to be steady to $1.50 per cwt higher, with most bids expected 50 cents per cwt higher early Thursday morning. Expected slaughter Thursday is at 489,000 head. Saturday runs are expected at 280,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
December live cattle futures continue to inch closer to July highs of $114.35 per cwt. A move above these levels through the end of the week would spark additional technical bullish support through the entire live cattle complex.
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Limited cash cattle trade at this point is creating some concern that fundamental support may be slowing through the last half of October. This could limit additional momentum in all cattle futures trade.
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| 2) |
Despite limited moves in feeder cattle futures the last couple of trading sessions, the aggressive trend higher should not be overlooked. November feeder cattle futures have rallied $17 per cwt over September lows in a little over a month, creating bullish momentum in the complex.
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Feeder cattle futures still remain nearly $2 per cwt under the next resistance level set in May. The limited market movement through the last couple of days is indicating that underlying market momentum is starting to weaken at current price levels.
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| 3) |
The overall impact of African swine fever through most of Asia continues to have major impact that is not expected to subside in the near future. This will continue to make our pork supplies attractive to the world market.
| 3) |
Moderate cash market weakness developed Wednesday, creating some concerns that the recent cash market surge may be overdone as packers continue to whittle away at previous margins the last couple of weeks.
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| 4) |
All 2020 lean hog contracts have now moved above the 40 day moving average, sparking increased underlying support in the complex. This is expected to increase momentum through the near future based on expected long-term product movement.
| 4) | Domestic hog supplies continue to be strong with packers maintaining active plant capacity and not significantly changing the overall supply of market-ready hogs. |
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