It appears that cash cattle trade may be gearing up for a generally ho-hum type of week with the overall tone of the market not expected to change significantly from previous weeks. The fact that packers are gearing up for lower production the next two holiday weeks will affect the amount of cattle that are needed to be purchased. At this point, most packers are not willing to aggressively source cattle for early January in the negotiated market given the current structure of the complex. Asking prices are expected to continue to be seen at $122 live in the South and $195 dressed in the North. Bids will likely become slightly more available through the day Wednesday, although the lion's share of trade is expected to be pushed off until sometime Thursday or Friday. Futures trade is expected mixed following the inability to test last week's highs on Tuesday. The moderate to firm pullback in February and April futures was a disappointing development Tuesday, but it did very little technical damage to the complex as prices may continue to hover in a moderate to wide gap near the top end of the trading range. Tuesday slaughter runs are expected at 121,000 head.
Mixed price direction is expected to develop early Wednesday morning with no significant fundamental or technical shifts expected to be seen through the complex. With traders now moving beyond the newness of the partial trade deal with China, which still lacks specific details on how it will affect overall pork exports, traders seem to be establishing a trading range within the current sideways market shifts seen through the last two months. With prices now holding comfortably above support levels, but well below November highs, it is possible that limited overall direction may be seen over the short term. With traders also looking for more subdued activity over the next couple of weeks, through the Christmas and New Year's holidays, the focus on day-to-day fundamental moves may continue to bring more activity into the complex. Cash hog prices are called steady to $0.50 per cwt higher Wednesday morning with most bids expected to be steady. Slaughter Wednesday is expected at 494,000 head. Saturday runs are pegged near 345,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Live cattle futures remain poised to break through resistance levels set last Friday, which would set new contract highs in nearby live cattle contracts. The focus on potential cash market support may help to spark early-day buyer interest as trades cover Tuesday's losses. | 1) | Limited direction in cash cattle markets is weighing on futures trade. The lack of development is not unusual, but traders are also concerned that the limited needs due to lower holiday production runs will lead to subdued cash spending through the end of the year. |
| 2) |
Cattle trade is still focusing on the potential for tight cattle supplies during first quarter of 2020. This is expected to limit any downside market pressure through the end of the year across live cattle and feeder cattle futures.
| 2) | Sharp losses in wholesale beef values left boxed beef prices with triple-digit losses. This lack of support is likely to play a major factor in not only cash market interest as packers focus on eroding margins, but may also quickly limit trader optimism in the futures complex. |
| 3) | Light to moderate support returned to wholesale pork values Tuesday, which is pointing to increased fundamental support through the end of the year. | 3) | Without significant short-term news relating to increased pork moving to China, the hog complex continues to remain in a supply glut that will limit the upside market potential over the next few months. |
| 4) | Traders are looking forward to weekly export sales reports to determine just how much of an impact trade dealings with China have affected overall volume through the last couple of weeks. Traders expect pork commitments from China will increase through the end of the year. | 4) | Cash hog prices remain supportive over the last week, but with upcoming holiday needs, packers are expected to limit cash market spending due to the amount of market ready hogs still available. This could soften cash trade significantly over the next couple of weeks. |
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