Cash cattle trade is expected to return to a normal Monday routine of showlist distribution and inventory-taking following last week's cash cattle trade on Thursday and Friday. The underling firmness in the cash cattle market pushed Southern live cattle prices to $119 to $119.50 per cwt, mostly $119 per cwt and a $1 per cwt gain from the previous week. Northern trade didn't fully develop until Friday with trade mostly $188 on a dressed basis with a full range of $187 to $190 per cwt. The trend is $1 per cwt higher than the previous week and is expected to spark increased bullishness from feedlot managers when pricing cattle through the week. There are only two full weeks of trade left in the year before moving into the holiday-shortened trading schedules, which means that both sides will be planning ahead in order to get numbers in order for month end. Futures trade is expected to remain mixed early Monday morning, although the late week firmness in live cattle and feeder cattle trade has helped to offset any growing concern of a major correction during early December. Continued pressure in boxed beef values last week has added some uncertainty to the complex, both limiting plant margins and raising questions about the ability to continue to move beef at current price levels through the end of the year. But trades continue to focus on supply tightness over the upcoming months, and so far, have been unwilling to back away from the bullish market undertone as live cattle futures remain in a narrow trading range, unwilling to move too far away from recent contract highs. Monday slaughter runs are expected at 121,000 head.
Lean hog futures are expected to be lightly traded early Monday morning following the underlying support that slowly but steadily moved into lean hog trade Friday. With China announcing that it will reduce tariff levels on some pork imports along with repeated rumblings that both sides appear to be making progress on a phase one trade deal, light-to-moderate support is expected in the near future. Although buyers may continue to move back into the market, until a deal is reached and the details of such a deal are revealed, it is going to be hard to aggressively move prices out of the current market range. At this point, given that domestic supply has continued to marginally keep up with the aggressive supplies, the downside potential of the market remains limited near $66 per cwt in February futures. But prices still could quickly wander within a $2 to $3 per cwt trading range through the end of the year without raising any eyebrows. Cash hog prices are steady to $1 per cwt higher Monday morning with most bids expected to be steady to 50 cents higher. Slaughter Monday is expected at 493,000 head.
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| 1) | Continued firmness in cash cattle trade last week has added increased underlying support to the entire complex. Cash prices have rallied $20 per cwt since September lows of $99 per cwt as traders continue to focus on the underlying bullish support developing in the complex. | 1) |
Boxed beef values continue to tumble lower, moving lower in the last four trading days. The concern that sluggish year-end demand may continue to spark increased beef values may limit the firm underlying support across cattle futures.
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| 2) | The strong underlying tone moving through live cattle futures at the end of the week offset the midweek bearish reversal. With February futures closing last week at $124.97 per cwt, this put even more distance from November lows of $123.85 per cwt, and established increased firmness moving into the next couple of trading sessions. | 2) |
Increased packer schedules with Tyson's Kansas plant now back online and moving closer to full production schedules is likely to flood the market with additional beef product through the end of the year. This may cause increased underlying pressure in futures and wholesale beef values through the end of the month.
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| 3) | Announcements by China that tariff levels on some pork products will be waved helped to spark long-term buyer support. This added limited but recognizable support to the entire complex, and it is expected to carry into the new week of trade. | 3) |
Trade uncertainty with China continues to loom over the market. Although increased China buying has developed in the past couple of weeks, the tone of the market still remains weak and vulnerable to increased concerns that negotiations may quickly break down.
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There was strong continued support in pork cutout values last week. This is helping to solidify additional firmness in wholesale markets and is likely to spark limited but firm buyer activity early in the week.
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Cash hog values eroded late last week following a strong upward shift through the week. This is creating some concerns that follow-through cash market support may be limited given the availability of market-ready hogs heading into the holidays.
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