Limited movement is still expected in cash
cattle trade Tuesday although a few asking prices may become available
as the day continues. Feeders are expected to attempt to stretch the
envelope following the multi-week rally in cash cattle prices over the
last couple of months. There is little indication to suggest a change in
the trend ahead of the holidays as higher cash cattle trade may defy
seasonal market trends through the next couple of months. Futures are
expected mostly higher with spillover support developing after Monday's
continued firmness in all nearby contracts. New highs for the market
rally developed in February and April contracts Monday, helping to
continue the bullish market trend that has pushed prices over $20 per
cwt from September lows. This continued focus on expanding the trading
limits and cutting into the spring highs is not only based on
fundamental market support and expectations of tighter supplies through
the upcoming months, but technical bullishness continues to develop.
Even though much of the Midwest is experiencing a strong cold snap, this
is not yet having a major impact on the overall market as temperatures
are expected to moderate quickly through the end of the week. Tuesday
slaughter runs are expected at 118,000 head.
Limited early activity is expected to develop in
lean hog futures trade early Tuesday. Given the light activity Monday
due to Veterans Day, there is expected to be more traders moving into
the complex. Most of the activity in the market at this point is
expected to be based on fundamental market moves as limited early-week
chatter has been seen surrounding the trade deals with China. It is
still hopeful that trade talks will continue, but there is uncertainty
as to just how much buy-in there is from the Trump administration on
last weeks announcement by China that both sides had agreed to roll back
tariffs in order to get a Phase 1 deal passed. The details of an
agreement will continue to be the sticking point, as both sides continue
to desire an agreement in principle, but when it comes down to the fine
print, this is where things get sticky. Cash hog bids are expected to
remain $1 lower to 50 cents higher through most of the morning, although
most bids are still expected steady to weak. Slaughter Tuesday is
expected to resume normal schedules at 489,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong early-week gains in live cattle and feeder cattle futures continue to spark bullish market notions as February futures have moved to new highs of $125.67 per cwt. The underlying firm market support in the entire complex continues to focus on potential gains leading into the holiday season. | 1) | Limited upward movement continues to be seen in boxed beef values during early-week trade. This is limiting additional longer-term buyer support as traders look for a seasonal dip in beef demand through the holiday season. |
| 2) | Continued interest from traders moving back into the cattle complex is sparking not only support in live cattle futures, but firming gains in feeder cattle trade. This is increasing technical underlying support in nearby and deferred contract months. | 2) | The continuation of the strong but steady bullish trend over the last two months is creating questions of when a market correction will develop. It will likely take an outside event to trigger a change in direction, as traders remain diligently watching outside market moves for this market indication. |
| 3) | Continued strong gains in pork cutout values has caused increased support. This move has pushed wholesale pork values over $5 per cwt higher in the last two trading days, sparking expectations of further gains to continue. | 3) | Nearby lean hog futures were unable to shift higher despite all other livestock markets gaining buyer support Monday. This may limit follow-through support in the complex as December futures are retesting seasonal lows. |
| 4) | Seasonal peak production levels are expected to be reached in the coming weeks, leaving expectations that the supply situation will slowly get more manageable over the coming months, and into the first quarter of 2020. This is likely to help spark underlying buyer support in both futures and cash hog markets through the end of the year. | 4) | Cash hog prices have been unable to follow the wholesale pork market higher, indicating that packers still remain flooded with ample market-ready hogs and are unwilling to increase spending as production levels remain at capacity levels. This could limit upward cash market potential going into the Thanksgiving season. |
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| #completeherdhealth |
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