The weekly cat and mouse game called cash cattle trade has started, but at this point, packers have shown a general lack of interest, although cattle have been priced by feeders since Tuesday. The few bids in the North at midweek are $198 per cwt and are likely to be reinstated, but this is not likely to gain much attention from bullish feeders, which have been granted higher prices the last several weeks and continue to expect additional support given the tighter supply in the coming weeks. Packers are focusing on preserving margins, which have shrunk considerably over the last month as they look at what could be tighter availability for needed cattle through the next couple of months. So far, packers are showing no intention of slowing procurement rates, but this is likely to change as the spring unfolds. The January USDA crop reports will be released Friday morning. This has the potential to significantly adjust feed price levels and impact overall cattle price levels, potentially keeping cash cattle trade at bay until after the morning report release. Futures trade is expected to remain mixed in a limited trading range. The strong support in feeder cattle futures Wednesday is likely to spark some additional underlying market movement and potential volatility as traders continue to test November highs through the most recent market surge. Thursday slaughter runs are expected near 121,000 head.
Overall global market uncertainty, anticipation the phase one trade deal will be signed next week, and growing tensions in the Middle East has caused traders to hover on the sidelines as they wait for the dust to settle. The fact that prices Wednesday were limited to a 20-cent trading range at closing bell, creates little evidence that aggressive buying is developing in the near future in order to regain the momentum lost last week. Although if continued export news develops, buyers are likely to step back into the market. But weekly export sales have been delayed until Friday morning due to winter weather in Washington, causing government offices to close early. This will be the third week in a row that export sales reports will be released on Friday, pushing any focus on export news back to the end of the week. Cash hog prices are called 50 cents lower to 50 cents higher Thursday morning with most bids expected steady to weak. Slaughter Thursday is expected at 495,000 head. Saturday runs are expected at 230,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong triple-digit gains in feeder cattle trade midweek is pointing to the expectation of tighter supplies of cattle moving into feedlots through the late spring and early summer. The expectation that additional light calves will be placed in feedlots through early January should tighten long-term supplies through the next several months. | 1) | Uncertainty surrounding 2019 corn production will hopefully be cleared up in Friday's USDA crop reports. This could have a significant impact in feeder cattle prices if corn markets show sharp post-report adjustments. |
| 2) | Expectations of steady-to-higher cash cattle trade by the end of the week is likely to keep feedlot managers holding onto increased asking prices until the very end of the week. This will likely cause packers to dig deeper in their pockets through the upcoming weeks in order to maintain current slaughter rates. | 2) | Continued pressure in boxed beef values is causing concern about the ability to move beef product through the new year and could quickly derail the trend in higher cash prices from the last several weeks. |
| 3) | Continued focus on long-term pork demand from export growth is likely to keep the bullish market flame burning through the upcoming weeks. This is helping to sustain the strong summer premiums, as most increased market support is likely in the second and third quarters. | 3) | Firm pressure in cash hog prices and wholesale pork values during early January is pointing to lackluster buyer interest as packers continue to fuel aggressive early-year slaughter numbers while a post-holiday demand dip is developing. |
| 4) | Even though little new information has been seen surrounding African swine fever in China and other Asian nations, the impact of the disease continues to heavily impact production and overall global supplies. This leaves room for increased demand for U.S. pork to be exported over the short and long term. | 4) | Lean hog traders appear to remain content on the sidelines as they watch outside market direction over the near future, as well as watch for any indication of specifics from the upcoming trade deal signing expected next week. |
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| #completecalfcare |
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