Packer interest is expected to improve through the day Wednesday, although the overall lack of consistent asking prices through all cattle country will likely keep trade from developing too quickly this week. Asking prices in the North are holding at $115 live and $180 per cwt dressed in Nebraska, while feeders have yet to float asking prices in the hopes that there will be confirmation to suggest strong support through the end of the week. When initial bids do develop, it is expected these will be well below asking prices, and will potentially push active trade to the end of the week. Firm support is expected to hold in cattle futures with the focus on December contracts testing short-term highs once again following the steady-but-firm buyer support moving back into the complex. With nearby contracts holding well above both 40- and 100-day moving averages since the end of September, renewed commercial support is building as well as the potential to spark investment interest, which has remained out of the market the last several weeks. Wednesday slaughter runs are expected at 117,000 head.
Aggressive buyer support moved through lean hog futures trade Tuesday on the reports that China has purchased large amounts of pork products. New sales have yet to be seen, but have continued to take the market by storm with limit gains developing in the December contracts. Assuming that these purchases are developing, it is yet to be determined if this will be short- or long-term buying planned. The market reaction would indicate that near-term buying is taking place, but given the ability to spread out commitments well into 2020, this could put pressure on nearby lean hog futures trade, which has reacted most aggressively to these reports. December futures continue to hold a strong discount to early 2020 contracts, although this gap is quickly narrowing through the week. Expanded trading limits are now available in all lean hog futures trade, which has the potential to spark increased market volatility through the entire complex. 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 Wednesday morning. Expected slaughter Wednesday is at 489,000 head. Saturday runs are expected at 277,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Growing expectations of continued cash market firmness is holding given the underlying support developing in beef and futures trade. Cash trade may hold out until the end of the week, although optimism is holding for firm cash market gains.
| 1) |
Feeder cattle futures were unable to maintain the optimistic support in live cattle trade Tuesday. The limited price pullback in nearby futures is starting to focus on the increased volume moving into the market of spring calves slated to go to market the next few weeks. This could further pressure nearby feeder cattle trade in the near future.
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| 2) |
Firm gains in boxed beef continue to add resolve to the entire cattle complex with select cuts advancing $2.15 per cwt Tuesday. The focus on continued underlying support moving back into wholesale prices is sparking market firmness.
| 2) |
The continued underlying support in live cattle trade may create some short-term corrective responses in the near future. Although the underlying tone of the market is expected to remain firm, the unchecked market rally the last month leaves prices vulnerable for a narrow-to-moderate pricing correction.
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| 3) |
Limit gains in December lean hog futures Tuesday helped to spark some underlying momentum as traders focus on potential export support from China. This will continue to focus on increased momentum based on moving supplies through the end of the year.
| 3) |
Despite the optimism surrounding potential sales to China, there is still a lot of vagueness concerning the recent partial trade deal, and potential movement of pork to China. This momentum is only one news story from being broken, given the volatility in the market.
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| 4) |
December lean hog futures have moved above the 40-day moving average on Tuesday for the first time since late July. This is expected to spark renewed underlying support through the complex as technical trade interest is building on the recent market rally.
| 4) | Despite the aggressive buying in nearby lean hog futures following potential trade news with China, the fact that deferred lean hog futures have been less optimistic compared to nearby futures is creating some questions of the validity of recent reports. |
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