Cash cattle traders are expected to get back into the swing of things following the holiday-shortened week disruptions of the normal schedule last week. With cash cattle trading $2 to $4 per cwt higher last week with most of the business done on Wednesday before leaving for the Thanksgiving holiday, it is expected that overall cattle movements were extremely light for the week. With the month of December now here, the expectation that increased delivery of contracted cattle in the first couple weeks of the month will take the pressure off of lower negotiated cash cattle trade. But this could still lead to some uncertainty and potential early week buying needing to be done by some packers. Most of the focus in cash cattle trade will be placed on inventory taking and show list distribution with limited bids or asking prices likely over the next couple of days. Despite a pullback in futures trade during the abbreviated Friday trading session, the firm undertone in live cattle futures remain. Traders are entering the month of December with expectations of additional strong buyer demand through the end of the year as supplies are expected to start to slowly tighten over the coming weeks and months. This has traders eyeing additional potential support and higher prices through early December. Monday slaughter runs are expected at 118,000 head.
Initial trade Monday is expected to remain mixed following the wide market gyrations seen surrounding the Thanksgiving holiday last week. With limited trade volume and little additional long-term direction in the market prices moved higher and lower in a triple-digit range through the last half of the week. It is uncertain if renewed buyer support will be able to develop early Monday with traders still uncertain about any firm developments when it comes to a trade agreement with China. The expectation is that even without a partial trade agreement, the current need for pork and overall protein sources in China will lead to increased buying of U.S. pork supplies. But this argument has been made for many months with only limited success at this point. Although current 2020 commitments are much stronger than current-year needs, this still is nowhere near the expected need of pork to replace the production losses seen through the country. This creates significant questions if the much anticipated buying surge will ever fully develop. Cash hog bids are expected to be $0.50 lower to $1 higher per cwt lower with most bids steady. Slaughter Monday is expected at 491,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong cash cattle support last week points to additional underlying support through the entire complex. This may add even more firmness to the entire live cattle complex during early December. | 1) | Limited cash market interest is expected across the cattle market Monday despite limited sales last week. This could cause packers to rely more heavily on current contracts, limiting the underlying firmness in the complex. |
| 2) | Cattle futures continue to hold the strong market uptrend despite the correction during the abbreviated Friday session. Feeder cattle futures rallied over $4 per cwt in the week heading into the Thanksgiving break. This momentum is likely to gather underlying momentum during early week trade. | 2) | Wholesale beef values faltered at the end of last week. Although trade volume was limited the concern of beef values stabilizing could spark increased uncertainty through the entire complex. |
| 3) | Firm end-of-week gains in pork cutout values is putting additional focus on domestic demand and the potential to spark a late year rally through the upcoming weeks. | 3) | Uncertainty surrounding the development of a trade deal with China continues to be seen. News reports Monday morning that China would not be willing to sign a trade deal until existing tariffs are lifted could add increased concern that the two sides may be at a stalemate. |
| 4) | Lean hog futures are expected to remain oversold as prices are hovering at or near long-term lows. The expectations of tighter hog supplies over the coming weeks and months as well as holiday demand developing for Christmas hams is likely to spark fundamental and technical support through the complex. | 4) | Cash hog values continue to erode at the end of last week. This is moving the national average price nearing $42 per cwt. Continued weakness in cash hog values will continue to limit underlying support through the month of December. |
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