The lion's share of cash cattle trade is expected to have wrapped up Thursday following light to moderate trade seen over the past two days. The majority of Southern trade took place on Wednesday, with a little clean-up activity developing Thursday. On the other hand, trade across the North developed during the day Thursday. Generally prices are steady to $1 per cwt higher from last week's levels, but consistent with previous days' moves in areas where trade took place both Wednesday and Thursday. Limited clean-up activity may develop through the day Friday, but prices appear to be generally set at $120 live basis and $190 dressed. Cash and futures trade will be be closely focused on the afternoon cattle on feed report. At this point limited excitement is expected in the afternoon report with pre-report estimates expected slightly higher than year-ago levels, but not enough to gain significant attention with placements pegged at 101.5% year ago levels, Marketing at 101% and total cattle on feed expected at 102.3% levels. If report numbers come close to these estimates, significant market movement is not likely as traders have already factored much of this adjustment into the market. Futures trade is mixed early Friday morning as the delayed weekly export sales report will give a good indication of additional beef movement through the middle of February. Although no significant surprises are expected at this time, it is likely that the typical regular trading partners such as Japan, Canada and Mexico will once again make up a large percentage of beef exports. The strong pullback in futures trade Thursday will also bring about mixed movement with some additional end-of-week uncertainty combined with light to moderate end-of-week short covering through most cattle trade. Friday slaughter is expected near 120,000 head.
Lean hog futures continue to focus on strong domestic production levels while uncertainty of moving additional product into China continues to keep traders wavering between optimism and pessimism. Traders are looking for additional direction from the morning release of export sales reports. This is not expected to show significant improvements as overall trade following the phase one trade deal with China is not expected to develop until this week, which would be reported in next week's report. The weekly export sales report continues to lag one week. Due to the implementation period of one month, it is expected that most trade-deal-related buying would not be seen until after February 15. It is an important reminder that this date is a starting date. So to expect that China will have rushed the market at the starting gate is an aggressive assumption that may or may not develop. The long term purchases over the next couple of years will be the important thing to watch, rather than a flood of activity in the beginning. Following the moderate pullback seen in trade Thursday, traders are adjusting to what could be a generally sideways pattern over the upcoming days and weeks. Cash hog prices are called 50 cents lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Friday is expected at 492,000 head. Saturday runs are expected at 188,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Traders are looking for additional export market direction in the delayed weekly export sales report Friday morning. There are not expected to be significant surprises, but confirmation of firm sales to normal trading partners is likely to help the underlying tone of the complex through the end of the week. | 1) | Additional gains in cattle on feed numbers are expected in Friday afternoon's report. This is not likely to have major short term market impacts through the end of the week, but it does once again put the focus on growing cattle supplies through the last half of the year. |
| 2) | Higher cash cattle trade during the week, especially in live cattle trade is expected to stimulate additional support through the complex going into next week and the end of the month. The focus on still-tight cattle supplies over the next few weeks should keep packers aggressively looking for additional numbers. | 2) | The inability to push dressed cash cattle prices higher following the bump in live cash cattle trade earlier in the week once again points to the limited upside potential of the market as packers try to regain limited margin support while still filling needed commitements. |
| 3) | Traders are looking for firm export numbers in the morning release of weekly export sales reports Friday morning. Once again the focus on new sales to China will be the primary point of interest with most traders. | 3) | Limited pressure in wholesale pork values and cash hog trade Thursday is cooling optimism of additional strong fundamental support through the entire complex. |
| 4) | Despite the pullback in prices Thursday, it is important to focus on the strong gains seen over the last week. April lean hog futures are still holding a $2.57-per-cwt rally for the week, which is significant in building long-term support through the entire complex. | 4) | Despite the need for China to fill the gap of pork production losses in the country, the economic impact seen by coronavirus is not clearly known at this time. This may significantly affect the ability for consumers within the country to actively purchase pork or other meat protein sources as previously expected, thus limiting the amount of pork demand through the country of China. Limited pressure in wholesale pork values and cash hog trade Thursday is cooling optimism of additional strong fundamental support through the entire complex. |
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