Cash cattle trade remains generally quiet early Wednesday morning with asking prices and bids still hard to fully pin down for the week. The underlying support in boxed beef values and lack of deviation from the current market support in futures trade is pointing to the expectation of higher cash cattle trade through the end of the week. Both sides are unwilling to fully put a foot on base at this point, although the underlying support would suggest another $1 to $2 per cwt rally is very possible by the time dust settles Friday. Trade is likely to be delayed until later in the week with some Friday trade almost expected at this point following the trend of cash market activity not wrapping up until late in the week. Futures are expected mixed in limited morning activity. There continues to be underlying firm buyer support near the current price levels as traders continue to hold prices at or near market highs for this market trend. With prices at the highest levels since spring, the focus on December contracts being able to move above and hold $120 per cwt has become the most recent hurdle. A move above this level is likely to create additional market momentum although aggressive buying above these levels are expected to be limited in the near future due to the traditional seasonal pressure seen through the holidays. Wednesday slaughter runs are expected at 118,000 head.
Firm buying redeveloped Tuesday in lean hog futures trade, sparking expectations of further market support. Extremely strong buying support is seen in pork cutout values through the week, with triple-digit gains seen each day. This is creating some uncertainty through the entire complex. Although it cannot be confirmed that the uptick in wholesale pork values is based on new export buying with the biggest expectation being China, the fact that prices have moved so high so quickly through the week create one to wonder. With Veterans Day holiday Monday, it will be Friday before a weekly export sales report is seen, and even then, this will give data as of last week. But with little change in overall supply levels and packers aggressively keeping plants at capacity, there appears to be a major change in the market in order to spark a sustained pork rally. Futures trade turned aggressively higher Tuesday as traders not only focus on the fundamental support from pork cutout values, but announcements by President Trump that a partial trade deal is "close." There still remain very few details as to what both sides will be willing to agree on, which could lead to widespread market shifts through futures trade. But none-the-less, with lean hog futures bouncing off of recent market lows, technical buying has redeveloped midweek. Cash hog bids are expected $1 lower to 50 cents higher through most of the morning, with most bids steady. Slaughter Wednesday is expected to resume normal schedules at 491,000 head. Saturday runs are expected at 345,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong renewed buyer support moved into boxed beef values, helping to solidify current price levels and creating additional long-term expectations of further growth. | 1) | Limited near term interest is developing in live cattle trade, limiting active trade movement into December and February contracts. The inability to hold prices above $120 per cwt could throw cold water on further short-term market support. |
| 2) | The announcement by Tyson in its quarterly earnings meeting that the Kansas plant is expected to become operational within a 60-day period helped to create underlying support and give credence to expectations of an end-of-year timeline previously assumed by many in the industry. | 2) | Lower than expected earnings and sales in the last quarter created general underlying concern at a time when beef and pork plant margins continue to remain extremely strong. This could create a market reaction as packers continue to tighten their belt through the next quarter, potentially limiting further market growth. |
| 3) | Aggressive wholesale pork buying continues, sparking another round of triple-digit gains in pork cutout prices. This underlying support continues to spark expectations of stronger demand despite still burdensome supply levels. | 3) | The aggressive gains in lean hog futures and pork values have yet to show significant support to cash hog prices. This continues to point to aggressive amounts of market ready hogs available to packers, limiting spending needed to keep plants at capacity. |
| 4) | February lean hog futures have rallied nearly $4 per cwt over the last week, as technical buying has moved back into the complex. This continues to leave the door open for additional strong technical support with limited resistance until $78 per cwt in February futures. | 4) | There still remains a cloud of uncertainty surrounding any trade talks or partial trade deal that may develop. With no set date to meet at this point, the lack of details will continue to limit underlying widespread market support. |
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