Cash cattle trade is expected to be quiet once again Tuesday. With generally smaller showlists circulating through the week, it is expected to point to a slight tightening of market-ready supplies in the near future. With the Kansas Cargill plant expected to be back on line with no major disruptions in the near future, overall daily and weekly slaughter numbers should return back to generally normal levels from the last couple of months. There is limited news about the Tyson plant, but previous statements that Tyson plans to have the plant operational by the end of the year seem to still have credibility, and would restore overall packing capacity to full strength. This is expected to come at the same time as overall cattle supplies continue to slow. The combination of additional capacity and tighter market-ready cattle numbers should add increased premium to both cash and futures trade near the new year. Futures trade continues to struggle to find significant buyer support early in the week, with an invisible ceiling at $114.50 per cwt in December contracts. Even though it has been hard to move prices above resistance levels, the ability for the complex to hold onto the majority of support in the last month and continue to test these short-term market highs is impressive, and it is sparking additional short-term interest. Tuesday slaughter runs are expected at 118,000 head.
Firm early week gains Monday in lean hog futures is expected to create underlying follow-through support Tuesday, but overall trade volume is expected to be limited, and could create continued sideways market shifts within the current market range. Trade remains generally disappointed by how the extremely large Export Sales report last week was handled, as there is little clarity as to when these sales took place, and if some of these sales were in anticipation and "good will buying" in front of trade talks. There will be much more emphasis on this week's Export Sales report, as it will cover a full week following the announcement of the "partial trade agreement," and continued statements by President Trump, that "China is already making large purchases." The uncertainty about the trade agreement and lack of details of what products are involved still makes many traders leery. 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 Tuesday is at 489,000 head.
| BULL SIDE | BEAR SIDE | ||
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The ability to bring the Cargill plant back online with only missing a few days of production will help to ease concerns of continued processing issues through the industry.
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Price resistance at and above $114 per cwt still remains strong in spot December contracts. This may limit buyers moving into the complex despite recent market support.
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| 2) |
December live cattle futures continue to hold near $114 per cwt price levels, well above the 40- and 100-day moving average. This is helping to limit market pressure in the entire complex as traders look for increased market support through the end of the year.
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Concerns that overall beef demand may falter through the end of the year and into early 2020 is likely one of the biggest long-term concerns facing the beef industry. Going into the holiday season, where beef is traditionally not the primary meat could limit short-term demand. Long-term demand may be seen if there is economic pressure at the consumer level during the next year in relation to the ongoing trade war and general economic slowdown expected by some.
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| 3) |
Traders will focus on the release of monthly Cold Storage reports, Tuesday afternoon. The expectation is that the announcements of large export sales over the "past few weeks" will help to reduce the overall pork inventory, helping to tighten supplies.
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Recent pressure in total open interest, continues to create concerns that limited interest is seen by commercial or noncommercial traders. This is likely to limit overall market volume in all lean hog trade over the coming weeks.
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| 4) |
Strong pork cutout values early in the week is pointing to increased product demand both in domestic and export markets. This is expected to help stimulate underlying support in nearby and deferred futures contracts.
| 4) | Cash hog values are expected to be mixed to generally lower Tuesday morning as packers continue to be faced with ample levels of market-ready hogs as they try to protect plant margins that have eroded in the last couple of weeks. |
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