Asking prices are expected to redevelop around $123 live in the South and $195 and higher in the North on dressed basis. The focus on three strong days of slaughter schedules yet this week to make up for the Christmas break will not only allow for additional movement of product, but focus on the need to increase commitments for next week. It is uncertain if trade will develop Thursday, or wait until late Friday as is many times the case, but packer bids may start to become much more available through Thursday morning. Futures trade is expected mixed in limited holiday trade activity. Although it is likely that more volume will be seen over the next couple of days than was seen Tuesday, many traders are still absent from the market as holiday vacations continue to take precedence. With USDA offices closed on Tuesday, no cash or meat prices or information have been released on Tuesday or Wednesday, which will put more focus on the morning reports that will be released midmorning Thursday. Thursday slaughter runs are expected at 121,000 head.
Despite the limited holiday trade activity through the week, a firm undertone continues to hold in lean hog futures trade as traders look at the potential for increased demand from China over the upcoming weeks and months. The combination of a "phase 1" trade agreement that apparently is being hammered out, and China's announcement that they are lowering tariff levels for all trade partners on over 850 products is creating additional hope and expectations that increased movement of pork to China will be seen during early 2020. Futures trade remains generally cautious, but seems to be optimistic with prices testing short-term support in nearby contracts, but still a long ways from breaking out of the sideways market trend seen during the last two months. Even with the firming undertone seen in the complex following the Christmas break, trade is expected mixed as traders position holiday activity due to the limited volume in the complex. Cash hog prices are called steady to firm Thursday morning with most bids expected to be steady. Slaughter Thursday is expected at 495,000 head. Saturday runs are estimated at 415,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Packers go back to work Thursday morning as they try to fill inventory needs for the end of the year. This is expected to leave to steady to higher cash prices over the next two days. | 1) | Limited trade volume through the rest of the holiday-shortened trading week is likely to limit overall movement of cattle futures. This could allow prices to limp into January with little additional market direction. |
| 2) |
Nearby live cattle futures continue to hold near the top end of recent trading ranges through the end of the year. This is expected to spark additional bullish market support over the near future as traders look for tighter cattle supplies over the coming weeks.
| 2) | With USDA and government offices closed Tuesday for the Christmas break, no cash or meat market information was available to the market Tuesday. This will create some uncertainty given the lack of information some traders utilize on a daily basis. |
| 3) | Continued focus on pork demand heading to China will likely be front and center through the end of the year. The potential for increased export to China in the coming months could quickly spur aggressive futures trade support in all nearby contracts. | 3) | Total hog numbers as of Dec. 1 increased 3% from year ago levels with a total of 77.3 million hogs in the nation's herd. This increase in herd size continues to focus on readily available pork supplies which will likely continue to keep market prices subdued. |
| 4) | Strong domestic demand for pork continues to remain despite all of the uncertainty in export markets. This ability to actively clear the glut of pork over the last year has boosted consumer demand for pork, creating expectations of further strength through early 2020. | 4) | Futures market volume is expected to remain limited through the rest of the week with many traders still extending Christmas holiday schedules. The extremely active cash hog movement over the next three days may cause some uncertainty and wider price shifts between cash and futures market direction.Limited details of the phase one trade deal that is being finalized and hope to be signed in early 2020 creates uncertainty in pork markets as there are questions of how this will affect pork demand on a short- and long-term basis. |
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