Mixed price movement is expected in cattle futures early Wednesday morning with limited short-term market changes developing in order to cause traders to quickly adjust to the complex. Cash cattle interest still remains quiet with packers still not showing bids early Wednesday morning. Although a few early asking prices are available at $127 live in the South and $203 and higher dressed in the North, the focus on end-of-week trade activity is developing. With packers tasked with securing full-week procurements through the next two months without a major holiday approaching, the expectation is that active trade will be pushed back to the end of the week with the tighter cattle supplies expected likely to keep cattle priced aggressively. Even though holiday demand has wrapped up, there is still a lot of focus on the ability to continue to move large beef stocks through domestic and export channels through the first few months of 2020. Combined with tighter market ready beef supplies, continued price support is expected in the near future. Wednesday slaughter runs are expected near 121,000 head.
Firm gains Tuesday was seen as a sense of relief, the early-week gains are still far from bullish as traders slowly dig out of the aggressive triple-digit losses seen late last week. The limit or near-limit losses Friday were considered overstated, and more precautionary in nature following the Iranian situation. But this market shift has created additional caution through the entire complex. With the signing of the Phase One trade agreement still scheduled for next week, the focus on potential demand growth to China remains the focus across the lean hog complex. But in order to regain further active buyer support in nearby and deferred lean hog futures trade, prices will need to regain early January losses and move spot February futures back to or above $71 per cwt. Cash hog prices are called $1 lower to 50 cents higher Wednesday morning with most bids expected steady. Slaughter Wednesday is expected at 495,000 head. Saturday runs are expected at 225,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Feedlot managers are aggressively raising the bar following last week's surge higher in cash cattle prices and expected limited supplies over the upcoming weeks. This will likely end in a late-week standoff, as packers are expected to need to pay higher prices in order to keep plants at desired capacity. | 1) | Lack of strong underlying support in boxed beef values through the week is creating some concerns that the recent support in cash values may be hard to sustain despite the tighter supplies of market-ready cattle. |
| 2) | Despite the market shifts through the New Year, live cattle futures continue to hold prices near contract highs. With prices unwilling to quickly shift lower, there are expectations that buyers will move through resistance levels in the near future as additional noncommercial buyer support moves into the complex. | 2) | Even though market expectations are bullish for the next couple of months, the expectation that summer cattle supplies will once again bounce higher is likely to limit the long-term support through the entire complex. |
| 3) | Expectations of increased trade to China continue to spark underlying market support through the entire lean hog complex as traders look for support to be seen in nearby and deferred contract months as more details are released about the current partial trade deal. | 3) | The inability to demand higher cash hog prices through the week is a result of packers gaining access to still large numbers of market-ready hogs. This is likely to continue through the upcoming weeks, limiting cash market support. |
| 4) | Although extremely dated, the monthly export sales report showed November exports continue to be extremely strong with overall exports and exports to China well over year-ago levels. This is creating expectations of continued export support through the December report, and continuing the trend into 2020. | 4) | Despite the planned signing of the Phase One trade agreement with China next week, there is still limited details of how the agreement will be implemented and a timetable for increased exports, including pork. With text of the agreement not expected to be seen until after the signing, this adds additional long-term questions. |
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| #completecalfcare |
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