Cash cattle traders are inching closer to getting business done Wednesday morning with limited asking prices and bids available by the end of Tuesday. Cattle are priced in the South at $121 to $122 per cwt with bids slowly developing at $118 per cwt. Limited interest is yet seen in the North, although both sides appear not to be in any significant hurry and trade may not develop until sometime Thursday or Friday. Given the stability and narrow shifts in futures trade, and continued pressure in beef values, it may be a challenge for feedlot managers to demand much more than steady to firm once the dust settles at the end of the week. The erosion in boxed beef values seems to have triggered only limited concerns in futures trade as traders continue to focus on the still strong beef values as compared to where prices have held through most of the fall. But traders will be looking for a sense of stability over the coming days in order to break away from the wholesale beef price freefall through the end of the year. Futures trade is likely to remain mixed again in a narrow to moderate range early Wednesday morning. With very limited long-term direction expected over the next couple of weeks, traders appear to be settling into a narrow to moderate holiday range, which may bring some additional stability to the complex through the end of the year. Wednesday slaughter runs are expected at 122,000 head.
Lean hog futures bounced firmly higher Tuesday, which is expected to spark some additional follow-through support Wednesday. Although a lot of attention remains on the potential of a phase one U.S.-China trade deal, the fundamental and technical support in the market is helping solidify additional buyer support as traders move into the holiday season. Moderate to strong gains Tuesday in cash hog prices and pork cutout values have underpinned the potential for increased underlying buyer activity. Technically, the market has been looking for an opportunity to break out of the nearby support price levels for the last few days. Given the weak structure of the market, prices could still move another $1 to $3 per cwt higher without making any significant long-term effect on the market. But continued gains would give traders more confidence that long-term support levels may hold through the end of the year. Cash hog prices are called steady to $1 per cwt higher Wednesday morning with most bids expected to be steady to 50 cents higher. Slaughter Wednesday is expected at 493,000 head. Saturday runs are expected at 320,000 head.
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| 1) | Expectations of higher cash cattle trade by feedlot managers continue to hold with initial asking prices developing Tuesday at $121 and higher. The thought is that market-ready cattle supplies will significantly tighten following the holiday season, creating a sense of urgency for packers to gain access to as many cattle now as possible. | 1) |
Beef values continue to erode over the last week. This has accounted for a moderate to firm pullback in both select and choice cuts heading into the holiday season. Although some stability is expected in the coming days, additional pressure may still develop before active wholesale buying develops.
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| 2) | Live cattle futures appear to remain comfortable at current trading ranges, and appear to be holding within a $3 per cwt price range at the top end. This could allow prices to sway back and forth over the next couple of weeks without showing significant technical market shifts before the end of the year. | 2) |
Live cattle futures appear to remain range-bound with traders comfortable shifting prices back and forth in the current sideways trading range. This may limit any breakout moves through the holiday season and could subdue overall volume through most of the complex.
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| 3) | Strong underlying gains in pork cutout values are noted as buyers start to ramp up last minute holiday buying activity. This will likely add increased underlying support through the entire complex. | 3) |
Despite strong gains Tuesday the lean hog complex remains fragile with prices near the low end of short-term trading ranges. This puts prices just one sharp loss away from breaking through long-term support prices, keeping traders nervous.
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Traders are closely watching for confirmation that China is buying additional pork. The focus will be on Thursday's export sales report, but the idea that additional end-of-year sales will be seen is likely to spark additional futures trade.
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Although progress is being reported on a partial trade deal ahead of the additional tariff hike planned for Sunday, with the holiday season quickly approaching it is uncertain just how quickly any resolution will be seen.
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