Packers and feeders still have a lot of work to do before the end of the week. Although a few additional cattle sold Thursday in the South steady with Wednesday's rally of $2 per cwt higher than last week, a lot of cattle still need to find a home before the end of the day. Packer interest should improve through the morning, although it could be mid- to late-afternoon before the two sides can agree on price levels and active trade develops. Both sides will continue to hold their line through much of the morning with asking prices expected around $114 to $113 live in the South and $180 to $182 dressed in the North. Early bids are not likely to change significantly from those passed over the last couple of days. Mixed trade is expected Friday morning, focusing on the pullback, which developed Thursday. The losses can easily be explained away as end-of-month profit taking, given the recent market rally and expectations through the complex that a correction was due. Uncertainty remains if buyers are yet willing to step back into the complex, or if they feel additional market pressure is in store through the end of the week. Even if prices continue to shift lower Friday, this does not indicate aggressive long-term pressure will follow next week, as traders still have to make a decision if prices will continue higher in early November, or establish a sideways trend near these recent highs. Friday slaughter runs are expected at 116,000 head.
Lean hog futures are expected mixed in early trade Friday. The ability for lean hog futures to end the day Thursday following aggressive triple-digit morning losses is viewed as bullish, but it is uncertain if this support will continue through the end of the week. The entire market is starting to get tired of the "will they, or won't they" news cycle and mentality when it comes to China and a partial trade agreement. Given the history over the past year, this should not surprise anyone. But there is so much additional hope built into the entire process, that it is hard not to get sucked into the drama developing ahead of anything planned. The ability of nearby contracts to close higher Thursday and potentially spark additional gains Friday has little to do with bullish market expectations, just that there is little additional news available to suggest breaking outside of the current trading range. Cash hog values are expected to be steady to $1 per cwt lower, with most bids expected steady to 50 cents lower. Expected slaughter Friday is at 482,000 head. Saturday runs are expected a 235,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Support in boxed beef values has remained strong through the last half of October. This suggests overall support remains at a time when seasonality indicates market softness. This points to continued underlying support through the near future.
| 1) |
Given aggressive gains during October, traders were disappointed by the lack of follow-through interest at the end of the month. This crack in resolve leaves the door open for further back-pedaling in early November.
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| 2) |
Additional cash cattle trade is still needed in most areas, although early Southern trade is expected to have set the tone for higher prices through the week. Unless a major shift is seen in futures trade Friday, feeders will remain aggressive with cattle prices through the end of the week expecting gains of $1 to $3 per cwt higher than last week.
| 2) |
Cattle weights continue to shift higher, indicating that even with the increased cash and futures prices over the last several weeks, market currentness has not yet been reached.
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| 3) |
The ability of lean hog futures to regroup following generally disappointing China export results Thursday morning is showing increased resolve through the complex. The ability to build off early week lows in all nearby contracts could help to boost underlying market support during early November.
| 3) |
Cash hog prices continue to erode with packers still struggling to keep up with abundant hog supplies. This is expected to continue through early November, limiting the need for added money in order to fill procurement needs.
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| 4) |
Despite back-and-forth speculation on whether a partial trade deal will be agreed upon in November, there is still hope and some underlying confidence that positive developments will be seen. This is helping build additional support into deferred contracts as traders look for long-term market help.
| 4) |
Concerns circulated from China putting doubts on if an agreement will be able to be reached in the near term. With no definite timeline or place for a meeting to replace the one scheduled for mid-November, even more uncertainty is in the complex.
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| #completeherdhealth |
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