Cash cattle trader remains dead in the water heading into the midweek session. With the aggressive losses seen in futures trade over the last several days, the concern that the underlying bearish tone of the market will significantly affect packers' desire and ability to offer cash values anywhere near steady money through the end of the week. Although packer and feeder interest has still remained generally quiet, it is expected that when cattle are priced, initial asking prices will be higher based on packer's needs to fill procurement levels during early February. But it may be Thursday or Friday before bids are seen, and may be a late Friday afternoon affair in getting cattle sold. Futures trade is expected mixed early Wednesday with live cattle futures appearing to remain generally oversold given the aggressive losses Monday and lackluster interest Tuesday while moderate support slowly trickled into the rest of the complex. The cattle inventory report is due out Friday, with early expectations of a 1% drop in levels from last January. This could give an overall firming support to the market, although it is important to remember that this report focuses more on long-term market direction due to the gaps between reports. But it still helps to give a good long-term view of the overall size of the beef herd. Wednesday slaughter runs are expected near 122,000 head.
Lean hog markets showed a sense of stability Tuesday, helping to break out of panic mode which developed the previous two trading sessions. This still leaves hog prices extremely vulnerable and under pressure, but the focus on testing long term lows seems to have eased slightly as the week continued. Increased pressure in pork cutout values has added even more uncertainty to the entire complex as traders remain concerned about demand for pork surrounding the advancement of coronavirus in China and other areas of the world. Statements Tuesday that the virus may not be as contagious as initially thought is helping to spark some more rational market decisions through midweek. The lean hog complex still remains under severe pressure, but the recent market softness is expected to have the complex oversold given the underlying need for pork worldwide, and expected strong domestic demand through the upcoming months. Cash hog prices are called $1 lower to $0.50 higher with most bids expected steady to 50 cents lower. Slaughter Wednesday is expected at 495,000 head. Saturday runs are seen at 235,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Early expectations of total cattle inventory levels are projected to be 1% lower than last year. This would indicate a pullback from herd expansion, and put more focus on expected tighter market-ready cattle in the next year. | 1) | Live cattle futures were the only livestock market not to hold initial morning gains Tuesday. The underlying softness in the complex and concern that follow-through weakness will develop over the upcoming weeks limited trade interest through the entire complex. |
| 2) | Strong gains in select beef cutout values Tuesday is helping to regain partial confidence through the complex as the week continues. This is expected to help support overall boxed beef values find additional support based on still strong demand growth through the upcoming spring months. | 2) | The recent pressure in cattle futures prices is causing expectations of steady to lower cash values at the end of the week. This could break away from the market stability seen through most of January and bring more focus on growing market-ready cattle supplies through the last half of the year. |
| 3) | Advancements on a African swine fever vaccine are being seen, which would help to significantly alleviate the dramatic impact on world production levels. This not only would help impact areas where the fever is present, but also calm anxiety in countries where an outbreak is feared. | 3) | Continued pressure in pork cutout values Tuesday adds additional underlying concerns to market stability through late January and early February. Without the ability to spark renewed pork cutout support, cash and futures prices are going to struggle to gain needed support. |
| 4) | Strong underlying support moved into cash hog values Tuesday. This is a small victory given the underlying bearish market shift over the last week, but it still focuses on the need for packers to gain access to large numbers of market-ready hogs on a daily basis, creating potential for increased cash support through the upcoming days and weeks. | 4) | Although overall hog production levels and hog numbers in China are hard to pin down, reported hog number growth in December could indicate that some of these herds which broke with African swine fever in the last year may be able to be repopulated. If herd sizes can continue to grow in China, this will limit the need for additional imports of pork over the coming months. |
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| #completecalfcare |
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