Interest in the cash cattle market is expected to remain subdued following the upward momentum seen last week. Even though increased underlying support is expected to develop and feeders are likely to once again rapidly increase asking prices, little to no market interest is likely to be shown early Monday. Interest will likely be limited to show list distribution and inventory taking with bids and asking prices not expected to be seen until near midweek or later. Futures trade is expected to remain mixed in holiday subdued trade. With financial institutions closed, government holidays like today typically limit the amount of trade activity moving into the market as many institutional traders remain out of the market. The sideways trading pattern seen over the last week continues to focus on the underlying bullishness of the market, but traders remain concerned about further market potential given limited demand support through the holiday season. Monday slaughter runs are expected at 117,000 head.
Additional back and forth trade is expected through the first half of the week following continued hope, but uncertainty of the overall direction of trade with China. Given the fact that overall supplies of pork in China continue to remain at multi-year lows due to continued presence of African Swine Fever, and pork prices in China continue to rise. One would think that additional active imports from the U.S. would develop. But the trade tension and current tariff levels continue to be a major stumbling block in moving pork to China as pork and soybean trade have taken on more of a symbolic role in the direction of trade negotiations. The import levels continue to be more a symbol more than anything at this point as China has actively increased imports from other trading partners while still leaving hope that additional room for U.S. buying continues if deals can be made. This back and forth bantering is expected to continue as both sides work to become closer to a Phase 1 trade deal that may be ready for signatures before the end of the year. Futures trade is likely to continue to be hyper-sensitive to any news release through the week, although this will add more volatility to the market than long term direction at this point. Cash hog values are expected to be steady to $1 per cwt lower, with most bids expected steady to weak. Expected slaughter Monday is at 488,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Continued underlying cash market support is expected to build additional fundamental bullishness into the complex through the week. Even though limited cash market interest is expected Monday, the tone of the market is likely to remain strong. | 1) | Limited market activity is expected Monday due to the Federal Veterans Day holiday. This could limit the underlying interest, leading to potential market volatility. |
| 2) | Noncommerical long positions continue to steadily grow according to last week's CFTC report. This indicates additional overall market support moving back into the complex through the month of November. This trend may continue through the end of the year. | 2) | With live cattle markets charts essentially holding steady over the last two weeks, increased concerns of a market correction continue to loom through the complex. This could disrupt recent underlying market support and break the technical firmness seen through the complex. |
| 3) | Sharp gains developed in wholesale pork values late last week. Pork cutout prices surged more than $2 per cwt Friday, adding expectations of further fundamental gains during the week. | 3) | Cash hog values are expected to continue to show light to moderate weakness due to the abundant hog numbers still available in the market. |
| 4) | February lean hog futures have rallied $2 per cwt off short term lows last week, helping to create a sense of market stability in the complex. This may spark some additional early week trade through the entire lean hog complex, establishing a strong market floor near $72 per cwt in February trade. | 4) | Holiday trade volume is expected to be even more prominent in the hog complex with no official government announcements expected Monday concerning trade issues with China. This could limit buyer support in what is expected to be a subdued trading session. |
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