Cash cattle trade appears to be sluggish to start this week given the short trading week and general lackluster activity surrounding the cattle complex. Single-digit moves in all nearby live cattle futures trade gives little indication of traders' interest in the upcoming days. Asking prices are expected to become much more evident Wednesday morning, but the overall lack of packer interest and bids developing at this point could continue to push any active cash market trade into Thursday, or likely Friday. Futures trade is expected mixed during the early minutes of trade Wednesday, although there is expected to be some deviation from the narrow 2- to 3-cent market shifts late Tuesday as traders try to adjust to current supplies and potential demand through the upcoming weeks. There is little positive weather premium in cattle futures as another winter system moves through the Midwest. Although these storms may not significantly disrupt movement of cattle or plant capacities, the impact on cattle gains will accumulate over the upcoming weeks. But at this point, the futures market doesn't seem to care, and will not likely show a significant price response unless an extreme weather system disrupts a large portion of cattle country for an extended period of time. Wednesday slaughter runs are expected near 121,000 head.
Lean hog futures slipped lower in late day trade Tuesday, backing away from underlying support earlier in the session. This is expected to lead to light-to-moderate price shifts Wednesday as traders try to firm up buyer support following a choppy, but generally sideways market shift the last couple of weeks. Traders continue to focus on the potential for increased export activity in the upcoming weekly Export Sales report at the end of the week. This is not expected to create aggressive long-term market support, but the unknowns through the complex, and need for increased demand for pork, especially from China is expected to spark some increased overall interest both short- and long-term across the lean hog complex. Continued underlying support in deferred futures trade has helped to push more focus on longer-term demand growth, but the current premiums in deferred contracts has limited interest as many traders already expected market improvement through mid-to-late summer months anyway. Cash hog prices are called steady to $1 higher with most bids expected steady. Slaughter Wednesday is expected at 496,000 head. Saturday runs are expected at 355,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Another round of winter weather is moving through the upper Midwest through the last half of the week. This is expected to limit overall weight gains in the near future and could tighten short- and long-term supplies moving to market in the near future.
| 1) | Erosion of packer margins the last couple of months has continued, leaving the potential for strong upward movement in cash cattle trade over the near future limited. It is likely that packers are not willing to push production capacity beyond current commitments, which may limit further price support in the near future. |
| 2) |
Packers continue to search for market-ready cattle, which is expected to lead to steady-to-higher cash cattle prices through the end of the week. The focus on continued limited supplies through the first couple months of the year will keep packers buying on a hand-to-mouth routine over the near future.
| 2) | Growing focus on alternative plant-based meats, continues to erode at overall meat consumption. Beef markets are the most heavily impacted by this strategy so far due to most products focusing on hamburger replacements at this point. The higher price point of beef compared to pork and chicken continues to put more emphasis on the beef products when it comes to protein alternatives being tested and manufactured. |
| 3) |
Strong gains in pork cutout values Tuesday may help to spark underlying buyer activity as increased focus on short- and long-term pork demand is likely to develop through the week.
| 3) | With the China New Year quickly approaching, it is expected that little market news or direction will be seen from China during the holiday season. This could limit trade volume and create uncertainty about further short-term buying activity to the country. |
| 4) |
Expectations of increased pork buying from China is sought as traders look ahead to the end of the week Export Sales report. With the Chinese New Year sparking increased overall demand through the country, the country will likely import increased pork following the phase-one trade deal signing last week.
| 4) | Continued large pork production levels are likely to continue through the first half of the year. This is likely to limit strong upside market potential without aggressive export movement to China in the coming weeks and months. |
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