Although additional cash cattle trade is still expected to be seen during the day Friday, the tone of the market is likely to be have been set by light to moderate trade trickling in over the last two days. Trade in the South developed Wednesday at $115 per cwt, while Northern dressed trade held $182 per cwt. These prices are generally steady to $1 per cwt higher than last week, and indicate a firming trend still develops through the complex. The break away from the $2 and higher gains per week seen over the past few weeks may curb market bullishness. But one can argue that the more stable and gradual price support remains more sustainable and is better for long term market movement as it limits price volatility. Futures trade are expected mixed to mostly higher. The ability for traders to earn back much of the previous losses created a calming effect across the complex, allowing traders to look for renewed long-term support. Seasonal pressure through the upcoming holiday season seems to be the major sticking point that should limit further growth over the next couple of weeks. The recent price swings through the week appears to have set a firm $2 to $3 per cwt trading range which traders may feel more comfortable, that could reduce the concern of a major correction developing over the near term. Friday slaughter runs are expected at 117,000 head.
Firm follow-through pressure seen Thursday is expected to create a weaker market tone at the end of the week. Although traders are closely following any export sales to China reported in the holiday-delayed release of the weekly export sales report, the concern that current supplies and the lack of active movement to export markets is causing traders to test support levels. December futures have now broken through October support, which puts the next threshold back below $60 per cwt. At this point February and April futures have still been able to hang onto short-term support levels, but further weakness over the next couple of days may quickly test trader resolve. There still remain more questions than answers surrounding the behind the scenes developments in a partial trade deal. With no indication of when a planned meeting will develop, and what both sides will be willing to give up in order to put the first piece of this puzzle together, the support in the hog complex has dissipated once again. Cash hog bids are expected to show little change from previous market moves with prices generally steady to $1 lower, with most bids steady to weak. Slaughter Friday is expected at 483,000 head. Saturday runs are expected at 345,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | The ability to hold strong midweek losses to a one-day event continues to show the underlying bullish tone present in the market. This is expected to help solidify additional late-week buyer support with traders potentially showing light to moderate support through the end of the week. | 1) | The recent pullback in boxed beef values Thursday seemed to cool the optimism surrounding continued aggressive gains during the rest of the month. |
| 2) | Higher cash cattle trade is developing in most areas, pointing to continued underlying strength seen across the entire cattle complex. There is expected further support developing through the near future. | 2) | Seasonal beef demand is expected to remain sluggish through the Thanksgiving and Christmas holidays. Although beef producers would like nothing more than steaks and burgers to replace turkey and ham, traditions seem to win out every year. |
| 3) | Strong underlying gains continue to develop in pork cutout values, creating the expectation that additional buyer support will return to the market over the next couple of weeks ahead of the Thanksgiving holiday. | 3) | Sharp continued lean hog futures losses has sparked growing concerns that markets may continue to weaken due to technical pressure and lack of short-term support holding across the complex. This could add even more late-week pressure to the entire complex. |
| 4) | Traders are looking toward the Friday morning release of the weekly export sales report, with the anticipation that China will have moved back into the market over the last couple of weeks. The need for increased pork through the country is expected to create a need for U.S. pork even with tariff levels on current product. | 4) | Additional weakness is developing in cash hog values with packers gaining access to enough to keep plants full while still pushing cash markets lower. |
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