It is the first full week of January and markets are essentially back to full volume following the holiday weeks, so cash cattle trade will be a major test of just how bullish cash markets will become during early 2020. Asking prices have remained unwavering all week with live cattle in the South priced at $127 per cwt while dressed cattle are maintaining asking prices of $202 o $203 dressed in the North. Bids have been unwilling to show significant movement since midweek, but without a major free fall in futures, prices will have to improve significantly in order to get cattle bought for the week. A few cattle were sold in Iowa Thursday on a dressed basis of $198, generally where most bids were set over the last couple of days. But feeders are firmly looking at steady-to-higher money than last week in order to pull the trigger, and likely willing to hold any unsold cattle over until next week. Futures trade is expected steady to firm with limited buyer support likely through Friday morning. The underlying firmness through the end of the week is helping to build some solid support in live cattle and feeder cattle trade. With prices still remaining just under long-term resistance levels, but hovering in the top end of the recent market range due to strong fundamental support, the potential for a strong break higher in the coming weeks remains likely. Friday slaughter runs are expected near 119,000 head.
Sharp triple-digit losses in lean hog futures Thursday created some underlying concerns of short-term market support ahead of the expected phase one trade deal signing next week. Although there is no indication that the deal will be signed, the past back and forth through the whole trade process with China makes one want to hold their breath until a deal is actually in writing and signed. The announcement by China that they will release additional pork from reserves ahead of the Chinese new year seemed to spark underlying pressure in the lean hog complex Thursday, although these releases are not expected to be a significant shift in overall supply in the country, and are not likely to spark widespread further losses. Traders are closely monitoring the delayed release of weekly Export Sales reports Friday morning, although the focus through the complex will continue to be based on underlying support based on long-term demand growth in export and domestic markets. Cash hog prices are called 50 cents lower to $1 higher Friday morning with most bids expected steady to firm. Slaughter Friday is expected at 489,000 head. Saturday runs are expected at 230,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle feeders are unwavering in higher asking prices through the week, and at this point, appear to be willing to hold out for higher prices. This is expected to spark renewed cash market support Friday. | 1) | Weakening packer margins the last several weeks is expected to limit packers incentive to maintain aggressive slaughter schedules through the upcoming weeks. This could curb additional cash buying activity as packers try to regain margins. |
| 2) | Boxed beef values bounced slightly higher Thursday. Although this is not a significant shift in price levels, it does give a glimmer of hope that renewed wholesale prices may be finally rebounding during early January. | 2) | Boxed beef values haven't been able to keep up with cash and futures prices through the last two months, which is creating some underlying concerns of previous expectations that aggressive price gains would continue through early 2020. |
| 3) | The expectations that a trade deal signing with China continues to be on track for next week is generally bullish for the lean hog futures complex long term. | 3) | Sharp triple-digit losses flooded lean hog futures trade Thursday, sparked by uncertainty of how much additional short-term China trade will develop in the coming weeks. |
| 4) | The impact and production losses still affected by African swine fever around the world continues to impact the overall supply of pork and will continue to be an issue through most of the year. This continues to leave U.S. producers in an optimal position to provide pork to the world for short- and long-term needs. | 4) | Weekly Export Sales reports are the main focus early Friday morning. Although traders look for firm overall export news, the inability to show significant additional commitments to China or active shipment levels will likely be viewed as bearish to the market at opening bell. |
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