It appears that cash cattle trade will be pushed off toward the end of the week once again with bids still hard to pin down early Thursday morning. Continued asking prices remain aggressive at $126 to $126 per cwt live in the South and $205 and higher dressed in the North. The aggressive nature of asking prices and the expectation that packers will continue to remain focused on filling plant capacity the next few weeks will point to managers, pointing to higher money by the end of the week. Tight cattle supplies are expected through most of the first quarter so packers will have to pay higher prices at some point, but packers will likely acquire as much beef as possible early in the year in case the tightness continues through the spring. Futures trade is expected mixed as the moderate-to-firm losses midweek may spark some underlying softness through the end of the week. Even if prices shift lower, it is expected that markets will remain rangebound near the top end of trading levels over the last month. Thursday slaughter runs are expected near 121,000 head.
Although much anticipation went into Wednesday's signing of the phase-one trade deal, following the signing, there was little if any information that we hadn't already known before the deal was signed. Although this was a historic day, in the sense that it forged an agreement in writing and focused on additional forward plans, to me it resembled "closing day" on a house. Although "closing" is significant, it represents that the heavy lifting and all of the future activities of making the home your own is still yet to come. What we know after signing of the trade agreement is that China agrees to purchase $80 billion of ag products over the next two years. We are yet to know the breakdown of these products, but we do know that totals are based on an increase over 2017 levels. Futures posted moderate support Wednesday, and are expected to see some light-to-moderate early gains based on expectations of short-term trade potential over the near future. Traders are also focused on the morning release of weekly Export Sales reports, which will focus on China's buying activity during the first full week of 2020. Cash hog prices are called 50 cents lower to $1 higher Thursday morning with most bids expected steady to firm. Slaughter Thursday is expected at 495,000 head. Saturday runs are expected at 152,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Moderate-to-strong cash market support is expected with feedlot managers focusing on upcoming tighter cattle supplies and the ability to demand higher prices through the next few weeks in order for packers to maintain active processing schedules. | 1) | Lackluster interest is seen in boxed beef values through midweek as the spark higher early in the week seemed to be quickly limited Wednesday. The inability to continue to demand higher wholesale beef values through the end of the month could limit further market support in all cattle trade. |
| 2) | With the partial trade agreement with China signed, this is expected to point to additional beef exports to China over the next two years in order to fulfill the overall expected export limits. | 2) | Firm pressure in all live cattle and feeder cattle trade Wednesday limited market support. The inability for nearby cattle futures trade to test resistance levels is creating a concern that a move to new contract highs may be difficult to attain over the near future. |
| 3) | The hog market can take a deep breath of relief as the phase-one trade agreement has been signed. Although there is still uncertainty of how this will impact short- and long-term pork exports, the focus on pork tightness in China creates expectations of growing demand through the upcoming months. | 3) | Traders are focusing on the weekly Export Sales report, which will be released Thursday morning. Significant cancelations from 2019 would indicate a pullback from the market ahead of the agreement signing, this may put short-term pressure on lean hog prices. |
| 4) | All eyes are on the Thursday morning release of the weekly Export Sales report. Traders are looking for increased overall exports of pork most specifically focusing on China's involvement during the first full week of January. | 4) | The inability to post strong underlying strength in pork cutout values during the first two weeks of 2020 continues to point to an underlying weak market structure with traders focusing on aggressive production levels that could limit long-term price support through the upcoming months. |
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| #completecalfcare |
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