Cash cattle trade for 2019 appears to be wrapped up, unless packers and feeders remain much more aggressive than seen in the last several weeks and get any business done in the next two days. The ability to hold off trade until late last week proved to be profitable for cash cattle markets with moderate to strong support developing when trade finally developed Friday. Cattle feeders are expecting on building on this momentum with asking prices likely to remain elevated once again in the expectation that New Year's holiday activity will keep packers in an aggressive move once again. Show list distribution and inventory taking is the main order of business Monday, although most significant heavy lifting will likely be delayed until the new year when both sides return Thursday and Friday and focus on setting a course for January. The major winter storm that blew through the upper Midwest through the weekend is expected to still have a significant impact on moving cattle early in the week. This may significantly reduce overall weekly processing plans in a week where limited production was already expected. Futures trade is called mixed in limited early trade. Although firm support following the gains in cash cattle trade is likely, the limited volume heading into a holiday shortened trading week will likely limit overall movement Monday morning. Monday slaughter runs are expected at 114,000 head depending on weather conditions and cattle movement over the weekend.
Limited early movement is expected Monday morning as traders move into the last two trading sessions of 2019. Traders are happy the year is drawing to a close, but there continues to be growing uncertainty as to what early 2020 will look like. The holiday-subdued trade activity over the last week is expected to continue with limited new fundamental or technical direction likely through the entire week as traders appear to be treading water until they get into the heart of January and market activity becomes back to normal following holiday breaks. Cash hog prices are called steady to 50 cents higher Monday morning with most bids expected steady. Slaughter Monday is expected at 482,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong cash cattle trade which developed Friday sparked underlying fundamental bullishness through the end of the year. The fact that feeders were able to command asking prices on cattle sold during the Christmas week is expected to set greater expectations during January. | 1) | Limited activity over the next two days as traders prepare for another midweek holiday is likely to still limit futures trade volume. This will once again put most of the emphasis in cash and futures market on the last half of the week and push activity into the New Year. |
| 2) | Traders continue to look for bullish market indications through the upcoming days and weeks with most of the focus on tighter cattle supplies during the first quarter of 2020. The potential to build additional short term premiums into cash and futures trade could spark bullish movement during the expected subdued holiday week. | 2) | The major winter storm, which moved through the upper Midwest through the weekend, is expected to create market disruptions and light to moderate death loss. Although this may not cause a significant impact in futures or cash prices during the holiday week, it will create local disruptions and with most of the impact at the farm and feedlot levels. |
| 3) | Traders continue to remain optimistic surrounding the partial trade agreement with China. Although details have been limited during the holidays, the expectation that "no news is good news" as both sides work out the details is expected to create additional hope through the end of the year. | 3) | Lack of support in futures and wholesale pork values following the Christmas holiday is creating additional concerns that additional underlying weakness may continue during early January. |
| 4) | Cash market support at the end of last week is expected to be used as a springboard to stimulate firm support through the end of the year. This combined with challenges to move hogs to market in the upper Midwest over the weekend is likely to further boost cash values during early week trade. | 4) | Despite the ability to hold well above long-term support levels over the last month, February lean hog futures have found it hard to spark significant buyer support. Nearby lean hog futures are hitting a glass ceiling with prices just under $71 per cwt in spot contracts, as traders look for another lackluster week of activity due to the midweek holiday break. |
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