The direction of cash cattle markets has not yet been established for the week with just a few cattle sold midweek in parts of the South. Although the sold cattle were priced at $119 to $119.50 per cwt, the lack of volume makes overall test too light to establish an accurate trend. It is expected that packers will become more aggressive through the day Thursday, although active trade may still not develop until late Thursday or early Friday. The focus throughout the complex continues to be based on increased packer needs with Tyson's Kansas plant ramping up production. Although this week's numbers will not show significant gains on a day-to-day basis, the focus on keeping plants full given current margins is strong incentive for packers buy cattle at steady-to-higher price levels. Futures trade shifted lower Wednesday, with triple-digit losses in all nearby live cattle and feeder cattle trade. Although the losses brought about increased anxiety, the fact that live cattle futures have held firm gains through the last couple of weeks is currently keeping prices contained in a sideways price shift. With February futures at $124.17 per cwt, prices are still holding above initial support levels of $123.85 per cwt. If markets can maintain these support levels through the end of the week, limited short-term downside pressure is expected. Given the wide price swings in feeder cattle futures during November, even the strong losses this week have kept the complex within a wide, but sideways trading range. Thursday slaughter runs are expected at 120,000 head.
Firm underlying cash market support during early December has helped to bring additional stability to the lean hog futures complex. This underlying support sparked limited but encouraging gains midweek as traders focused on firm support developing in spring and summer 2020 contracts. Although traders still remain cautious about short-term supply levels, the expectation is that the availability of market-ready hogs will continue to tighten during early 2020. Although this is expected to bring only limited price support, a move above long-term lows and slow but steady growth in nearby contracts is expected to be sparking increased commercial and noncommercial support. Trade is still expected to remain mixed early Thursday as traders remain concerned about long-term demand expectations as trade tensions with China continue to develop. Cash hog bids are expected to steady to $1 higher per cwt with most bids steady to $0.50 higher. Slaughter Thursday is expected at 493,000 head. Saturday runs are expected at 325,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Despite early week futures pressure, live cattle futures still remain above initial support levels of $123.85 per cwt in February futures contracts. The ability to maintain these price levels through the end of the week should help to maintain additional market support during the next couple of weeks. | 1) | Strong boxed beef pressure in each of the last two days sparked underlying concerns through the entire live cattle complex. The inability to actively move beef product at steady-to-higher price levels coming out of the Thanksgiving holiday weekend adds not only short-term concerns, but causes questions about building substantial end of year demand. |
| 2) | Strong packer schedules is pointing to steady-to-higher cash cattle trade by the end of the week. With Tyson's Kansas plant back online, although at a limited schedule, packers' appetites continue to grow, with currently large margins giving every reason to keep plant output at or near capacity. | 2) | Sharp triple-digit losses in live cattle and feeder cattle futures has yet to create significant technical damage to charts, but the swift shift lower impacted market momentum during the week, leaving questions if live cattle prices can hold initial support levels set during late November. |
| 3) | Firm cash market support in the last three days is bringing additional fundamental support to the entire lean hog complex. | 3) | Sharp triple-digit losses in live cattle and feeder cattle futures has yet to create significant technical damage to charts, but the swift shift lower impacted market momentum during the week, leaving questions if live cattle prices can hold initial support levels set during late November. |
| 4) | Underlying buyer support is redeveloping in nearby lean hog futures trade. February futures have moved off short-term lows the past two trading sessions, creating a moderate gap between current levels and support prices. February futures have rallied nearly $2.50 per cwt during the week, sparking expectations of further late week market support. | 4) | Despite the firm gains in cash hog and wholesale pork values during the week, the availability of market-ready hogs moving to packing plants remains strong, limiting the upside potential of cash market prices the next couple of weeks. |
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