It is not a huge surprise that it has come down
to Friday cash cattle trade once again. Overall interest in the market
before the holiday was extremely light, but packers still appear to need
some additional cattle in order to fuel the abbreviated packing
schedules next week. This should keep both sides on their toes through
the entire day. Although the lack of cash market direction so far this
week would suggest it could become a late-day affair once again this
week, it is important to remember this is still considered a holiday
weekend with many gatherings still taking place between the Christmas
and New Year's holiday. Given the renewed support in futures trade and
need for cattle, cash markets are likely to be no worse than steady,
with the potential for light to moderate holiday support still keeping
feeders holding onto higher asking prices. Cattle remain priced near
$123 live basis in the South and $195 in the North, although the resolve
will quickly fade through the end of the day if packer bids do not
improve significantly. Futures trade is expected to renew the positive
tone which developed Thursday as limited volume has allowed for
underlying bullish market support to move back into all cattle markets.
Although Thursday's gains have been unable to break through resistance
levels, the reversal from the swift shift lower in feeder cattle trade
appears to be sparking bullish technical support through the end of the
week. Friday slaughter runs are expected at 119,000 head.
Lean hog futures are expected to remain lightly
traded once again following extremely limited support or market
direction during the holiday week. The complex continues to carry a
sense of underlying support as traders look for increased market
direction and potential for additional news concerning China trade
during early 2020. But the lack of short-term news and limited overall
volume across the entire complex is allowing traders to take a much less
aggressive stance during the holiday week. With Saturday packer runs
essentially wiping out lack of packers processing Wednesday due to the
extremely high packer activity, any holiday impact on overall supplies
or change in hog weights is expected to remain limited over the next
couple of weeks. But with next week another holiday week and overall
trade volume likely to remain extremely limited again, the narrowly
mixed price ranges could continue into early January. Cash hog prices
are called steady to 50 cents higher Friday morning with most bids
expected to be steady. Slaughter Friday is expected at 481,000 head.
Saturday runs are estimated at 415,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | The strong resolve of cattle feeders to pass up steady money through the week is pointing to the expectation of $1 to $2 per cwt gains by some feedlot managers in order to move cattle during the holiday week. This could help the underlying cash market attitude, as these are likely the last cash cattle sales of 2019. | 1) | Boxed beef values have been less than supportive following the Christmas break. With Choice cuts posting triple-digit losses Thursday, the concern is additional wholesale price weakness may continue to develop through the end of December. |
| 2) |
January feeder cattle futures led
the aggressive triple-digit rally Thursday. This move higher put
short-term resistance levels in traders' sights, with new December highs
very possible by the end of the week. A move above $145.67 per cwt in
January futures during Friday's trading session would spark renewed
technical support early next week.
|
2) | Limited trade volume during the holiday week makes strong price support seen Thursday less certain than normal weeks. Traders are well aware of how limited interest can quickly change the direction of price levels, creating concerns of a end-of-week market reversal. |
| 3) | Traders look for increased buyer support from China through the end of the year. It is uncertain just how much of the talked about buying activity will show up before the New Year, but traders are looking more for consistent buyer support, rather than a certain total on a weekly basis. | 3) | Pork cutout values struggled Thursday, leaving concerns that previous support may be quickly eroding as holiday buying has wrapped up. This could limit additional movement through the entire complex Friday. |
| 4) | With February live hog futures becoming well rooted above $70 per cwt and April futures above $78 per cwt, it appears seasonal lows have been set. This could help to spark additional strong buyer support through the end of the year and create additional market momentum during early 2020. | 4) | Although Christmas week is nearly in the books, the fact that another week of limited trade and holiday adjusted trading schedules is just around the corner is creating concern that traders may break away from the steadily mixed market direction seen over the past few days. Increased end-of-year positioning may spark some volatile market swings through the remainder of December. |
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| #completeherdhealth |
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