Cash cattle trade was the bright spot late last week, with prices surging $2 to $4 per cwt Friday afternoon. The focus on continued tight market-ready cattle through the next two months added increased incentive for packers to dig deep into their pockets at the end of the week in order to secure additional deliveries through the next couple of weeks. It is still uncertain just how many cattle sold at the higher price levels, although the strong cash market trend is expected to help bring some needed stability to a weakening futures trade early in the week. Monday's cash market interest is expected to be limited to showlist distribution and inventory taking as traders move past holiday schedules and into the first full week of production of 2020. Bids and asking prices are not likely until later in the week. Futures trade is expected to remain under pressure following strong late-week losses in live and feeder cattle futures. Uncertainty of how traders will react to widespread losses in commodity and stock markets Friday as it relates to the situation with Iran will add additional concern not only to commodity prices in general but to the beef complex as well. Monday slaughter runs are expected near 120,000 head.
Lean hog futures open the first full trading week of 2020 with expanded trading limits of $4.50 per cwt following the limit losses Friday in February trade. The tensions surrounding the airstrike on Iran's top general has sparked growing uncertainty with many traders of the potential to continue to deal with China over the coming weeks and months. Although there is no indication that the planned Jan. 15 signing of the phase one trade deal will not take place, there is growing nervousness that trade talks will become a little dicey going forward given the global political climate. The hog complex had already factored the trade deal into the market, thus any sign of further disruption to trade to China or other global trade partners will likely carry a significant bearish tone, and aggressively impact short-term prices. Cash hog prices are called 50 cents lower to 50 cents higher Monday morning with most bids expected steady to weak. Slaughter Monday is expected at 495,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Sharp cash market gains through the end of last week sparked renewed expectations going into the new year. With Southern trade generally $2 per cwt higher, while Northern trade posted a $4 per cwt rally, feeders are looking for increased support as January continues. | 1) | Sharp triple-digit losses seen late last week as traders remain concerned about how the recent Iran situation will impact not only global economics, but overall commodity trade has created a pullback through the entire complex. |
| 2) | Stronger boxed beef values flooded the market late last week with select cuts leading the complex with a $2.76 per cwt rally Friday. This underlying support and the expectation that firm beef values will continue to be supportive due to tighter supplies in the near future is adding underlying fundamental support to the complex. | 2) | Continued warm temperatures through much of the Midwest and most of cattle country is allowing for exceptional cattle performance. This will likely add further market pressure to live cattle trade due to expected strong gains during early January. |
| 3) | The planned signing of the phase one trade deal is still on schedule despite global tensions. This should help to move traders away from recent market volatility early in the week, putting the emphasis back on the long-term demand support for pork likely in China. | 3) | Sharp limit losses in spot lean hog trade Friday opens the door for expanded trading limits. Given the still volatile market structure, it is possible that additional widespread losses may flood the market early Monday morning. |
| 4) | With tensions surrounding the Iran situation, the fact that African swine fever continues to create significant disruptions to pork production in China and many other Asian countries has moved to the back burner. But the lack of affordable meat supplies in these countries cannot be overlooked, and still remains a bullish factor for U.S. pork going into 2020. | 4) | Overall lack of support in pork exports in last week's report adds concerns that the ability to move additional product through early 2020 to normal export market channels may be limited. This would create significant fundamental pressure through the first quarter of the year, due to continued growth in U.S. production still expected. |
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