Limited interest in cash cattle trade so far this week. The underlying bullish tone in cattle futures continues to spark expectations of renewed cash price support once the dust settles at the end of the week. Bids and asking prices are still hard to pin down Wednesday morning, but it is likely more cattle will be priced at higher levels before the end of the day. Active trade will probably be delayed until Thursday or Friday. But the building packer margins and continued underlying support through the entire complex will likely spark renewed resolve in feedlot managers. Futures are called mixed as traders look for additional stability at or near short-term highs seen early in the week. Although firm to moderate pressure held in feeder cattle trade Tuesday, the focus on prices well above the 40- and 100-day averages in both markets is sparking underlying buyer support. Wednesday slaughter runs are expected at 118,000 head.
Underlying firmness to continue through lean hog futures at midweek. Some momentum seems to remain from the news that China is opening imports from Canada. Although it would be better news if the agreed exports were coming from the U.S., the general consensus is this is one step closer to getting additional short-term exports into China. And, with more exports from Canada moving to China, we have the opportunity to fill a gap by exporting more pork to our northern neighbor. But we need to remember the aggressive triple-digit gains of Tuesday still leave contracts near the bottom end of long-term price ranges, with a lot of upward market potential if any significant export trade develops over the coming weeks. Cash hog values are expected to be steady to $1 per cwt lower, with most bids expected steady to 50 cents lower. Expected slaughter Wednesday is at 490,000 head.
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Strong underlying support continues to develop in early 2020 contracts as traders focus on expected supply pressure in the first quarter of New Year. This is expected to limit downside market pressure over the next several months.
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Feeder cattle futures have stabilized through early November, creating concerns that further support may be challenging through the next couple of weeks. The inability of January futures to move above $146 per cwt and hold these levels through the holiday season may limit long-term support through the complex.
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| 2) |
Continued strong market momentum across the entire cattle complex during early November is sparking expectations of additional cash market support through the end of the week. This is limiting feeders floating asking prices at this point in the event of further bullishness as the week continues.
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Mixed boxed beef values Tuesday may indicate the recent surge in wholesale values may be slowing significantly following the recent market support. This could create underlying softness in the nearby contracts based on expected seasonal demand slumps typically seen over the holidays.
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December lean hog futures nearly hit limit gains Tuesday as expectations of increased export demand moving to China continue to make traders and most market watchers salivate with anticipation.
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Despite renewed buyer optimism in lean hog futures, the lack of confirmation that aggressive Chinese imports from the U.S. are in the near future could quickly sour trader attitudes.
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Summer 2020 lean hog contracts continue to hold a wide market premium based on expected demand support, both domestic and export, through the next year. This is helping take some attention off short-term market moves as traders look for better market developments next summer.
| 4) |
Continued strong seasonal hog production continues to provide abundant pork. Without aggressive short-term increases of exports to either China or significant increases to our other trading partners, continued market support will be hard to sustain.
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