Light-to-moderate trade developed across the South Thursday afternoon with prices at $119 per cwt. Although there may be some additional cash sales trickling into the market Friday, the tone of the market is expected to have been set, with prices fully steady with last week's price levels. The inability to command higher cash prices in the South appears to be a moderate disappointment to the futures market, which pulled back from early Thursday support. But at the same time, the steady money should not come as a significant surprise as ample market-ready cattle continues to move to market and packers are attempting to stabilize margins, which have tumbled over the last couple of weeks. Northern trade still needs to develop with only a handful of sales developed Thursday, and not likely enough trade to establish a good trend. This may still allow for late-day activity, although it is likely that cash markets may hover around the steady range. Futures trade is expected mixed to moderately lower early Friday morning with continued weakness in beef values starting to weigh on nearby and long-term futures trade. Although anticipation for tighter supplies through the first quarter of 2020 still remain the main focus of cattle trade, beef values have to regain support in order to keep prices strong. Friday slaughter runs are expected at 120,000 head.
Strong underlying support remains the focus in lean hog futures trade as traders continue to focus on the potential for positive news concerning a partial trade agreement with China in the near future. Continued chatter from both sides seems to indicate that there is building momentum on the idea that "something" is close. But details and timelines are still very uncertain, which leaves the market in the same purgatory it has been in the last several months. With the next round of tariffs set to go into effect Sunday, there is pressure to make progress before that time. Even if an agreement isn't reached, enough progress, and "goodwill" by both sides that sufficient progress is being made could delay the tariff level while both sides continue to hammer out details. Although the underlying trade anticipation helped to spark increased support in the complex Thursday, the inability to hold session highs adds renewed concerns about end-of-week support. Cash hog prices are called steady to $1 per cwt higher Friday morning with most bids expected to be steady to 50 cents higher. Slaughter Friday is expected at 486,000 head. Saturday runs are expected at 308,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Continued aggressive packer interest with weekly slaughter numbers expected to be at or near the monstrous levels last week will keep packers aggressively looking for market ready cattle through the end of the year. This should limit cash cattle pressure the next couple of weeks. | 1) |
Additional sharp losses in wholesale beef values has continued to leave the entire live cattle complex uneasy. Until beef prices stabilize, it will be nearly impossible to command strong futures buyer support.
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| 2) | Recent live cattle futures stability in the light of aggressive triple- digit losses in boxed beef values indicates strong underlying support above $125 per cwt in February futures. This is likely to solidify technical support through the end of the week. | 2) |
With only one week left in the year of normal packer and trading schedules, the complex is quickly moving into holiday mode. This is expected to limit trade volume in the cash and futures trade, which many times brings about widespread volatility that doesn't follow fundamental factors.
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Lean hog traders look for positive news surrounding trade negotiations through the end of the week. Although details remain sketchy at this point, market interest and the general tone appears to be anticipating positive news in the near future.
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Pressure in cash and pork cutout values Tuesday raises questions of follow-through support through the end of the year. Much of the wholesale holiday buying has already wrapped up, leaving concern of growing pressure through the end of the year.
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February lean hog futures held onto strong gains at the end of the session Thursday. This moved prices to new December highs, as traders look for increased underlying support to develop in the near future. The ability to move prices over $2.50 per cwt higher in the last two weeks is sparking increased technical buyer support in the complex.
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If trade talks do not deliver the much-anticipated positive news before the end of the week, and the next round of tariffs go into effect Sunday as planned, increased pressure is likely to develop in lean hog futures as traders look at this as another market letdown, and potentially delaying any significant decisions until after the holidays.
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