Following light-to-moderate trade, which
developed mostly on Thursday last week, but pushed prices $1 to $2 per
cwt higher, traders are not expected to be in too big of a hurry to get
business done. It is likely that little interest from both sides will be
seen until after Christmas. This could lead to a flurry of cash market
trade on Thursday or Friday. Although it is still uncertain just how
many cattle need to be purchased following packers buying ahead over the
last couple of weeks and limited procurement levels the next two weeks.
But Monday will still see showlist distribution and inventory taking as
both sides prepare for a disjointed week ahead of the Wednesday holiday
break. Futures are called mixed with limited early direction expected.
Friday's Cattle on Feed report was far from shocking with increases in
total cattle on feed and placements, while marketing slipped during
November. The fact that cattle placements came in well above early
market estimates at 105% year-ago levels compared to estimated levels of
100.9%. This is still within the expected range, but the increased
amount of cattle placed in feedlots once again points to the increased
availability of market-ready cattle through the second and third
quarters of 2020, which remains a stark contrast to the tighter supplies
expected in first quarter 2020. The fact that marketed cattle was 3%
lower than last year, but right on target with expectations continues to
add concern about keeping cattle numbers current, but this again is not
surprising. Monday slaughter runs are expected at 120,000 head.
Lean hog activity is expected to remain mixed in
a limited trading range as traders look for sluggish trade the next
couple of weeks. With traders looking for increased direction on herd
size following Monday afternoon's Hogs and Pigs report, traders may
start to adjust for potential inventory changes long term. Although it
is expected that overall hog supplies will bounce moderately higher if
China becomes a bigger player in the pork market over the next year,
this may lead to limited expansion. The changes in hog numbers are not
expected to cause major market adjustments through the end of the year.
Hog slaughter is expected to be end loaded with an aggressive Saturday
run likely to try to offset limited packer activity Tuesday and
Wednesday. Cash hog prices are called steady to $0.50 per cwt higher
Monday morning with most bids expected to be steady. Slaughter Monday is
expected at 494,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Boxed beef values bounced higher late last week. Although gains Friday were far from aggressive, the ability to break away from the weaker tone over the last couple of weeks is helping to add some much needed stability in wholesale beef values going into the Christmas holiday. | 1) | Firm increases in cattle placements during the month of November is likely to create long-term weakness through the entire cattle complex. The additional shift in cattle moving into feedlots over the last three months is far from shocking, but it does put more pressure on overall ready cattle numbers through the middle of 2020. |
| 2) |
Total cattle on feed came in as
expected with total cattle numbers at 102% of year-ago levels. This is
0.1% above early market estimates, with a total of 12 million head on
feed Dec. 1. This should limit bearish pressure on the side of total
market availability of cattle in feedlots.
|
2) | With cattle marketings in Friday's Cattle on Feed report coming in as expected, the pressure is now on moving cattle from feedlots and through the system. The inability to keep marketings current while overall feedlot numbers continue to grow could cause general price pressure down the road. |
| 3) | Continued expectations of growing export sales, especially to China through the end of the year is likely to keep buyers active despite the holiday limited trade. | 3) | Limited support in wholesale pork prices through the end of last week continues to add concerns that packer margins may continue to erode during the next few weeks, limiting the incentive to keep plants full over the holiday season. |
| 4) | Firm cash market support continues to trickle into hog markets as packers focus on aggressive early-week procurement levels in order to make up for the abbreviated holiday schedules during the week. | 4) | With the quarterly Hogs and Pigs report released Monday afternoon, the expectation for light-to-moderate growth in the domestic hog herd based on long-term bullish expectations of world demand could add pressure to an already weak lean hog market structure. |
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| #completeherdhealth |
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