Following weaker cash cattle trade and a bearish market structure last week, limited focus is going to be placed on cash cattle activity early Monday. Showlist distribution and inventory taking is likely to be the extent of cash market interest with asking prices and bids likely to be pushed into midweek or later. Cash cattle ended lower in all areas last week with live southern trade developing on Wednesday and Thursday generally at $122 per cwt with a full range from $119 to $122 per cwt. This is $2 per cwt lower from the previous week. Northern dressed trade did not become active until Friday with prices from $193 to $196 per cwt, mostly $195, which is a $4 per cwt drop from the week before. The focus on creating market stability in cash markets will need to be supported by firm buying support moving into futures trade and stability of beef values. Futures trade is expected mixed in limited early trade Monday. With live cattle futures falling $4.63 per cwt in April contracts last week, the market still remains oversold, but given the weaker structure in all livestock markets, there has been little interest in aggressively offsetting the market pressure from the last couple of weeks. The cattle inventory report released Friday afternoon brings a mixed bag to the table. While overall cattle numbers have shifted slightly lower, including a pullback in beef cows, the confirmation of increased cattle on feed as of January is likely to have the most immediate impact on overall market direction. Monday slaughter runs are expected near 121,000 head.
Aggressive pressure in lean hog futures seen last week has created significant weakness through the entire complex. April lean hog futures fell nearly $12 per cwt last week, creating additional concerns of liquidation and uncertainty where support levels will finally hold. Widespread concerns of overall demand pressure in China surrounding coronavirus has caused many to scale back expectations of export demand gains to the country, at least for the short term. The growing concern in the hog complex is not entirely on the people effected by the virus, but the overall impact to the economic structure and health of both China and many other countries who rely on China's economy for their market support. While concerns of moving pork product cause markets to tumble, the expectations of additional growth in domestic hog production levels through the upcoming months is curbing market support. Given the hog market is extremely oversold, the potential for a quick and aggressive market bounce is also likely to create more activity early Monday morning, but at this point, it is uncertain which direction will win the most support through the trading day. Cash hog prices are called $1 lower to $1 higher with most bids expected steady to 50 cents lower. Slaughter Monday is expected at 496,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle inventory levels have fallen slightly as of Jan. 1. This is the first decrease in cattle inventory levels since 2014, indicating a likely end to cattle market expansion through this cycle. This should help to spark long-term support through the complex based on limited breeding stock retained through the country. | 1) | Strong pressure in cash cattle trade last week sparked concerns that additional underlying weakness may continue to develop through the upcoming weeks. |
| 2) | Beef replacement heifers fell 2% at the end of the year. With increased numbers of heifers moving into feedlots through last year, a retraction of the breeding herd and a likely smaller calf crop in 2020 and 2021 should help to tighten overall long-term supplies. | 2) | The immediate impact in Friday's cattle inventory report is likely to be the 2% increase in cattle on feed levels over the last year. This puts even more pressure on short-term beef prices based on these cattle moving to market during the second and third quarters of 2020. |
| 3) | Lean hog futures remain oversold, allowing the opportunity for commercial and noncommercial traders to step back into the complex in the near future. This could quickly change price direction through early February. | 3) |
Lean hog futures have yet to break away from the market free fall through the last week. Last week April lean hog futures tumbled $11.85 per cwt as panic selling continued well into Friday afternoon.
|
| 4) | Domestic pork demand still remains strong through early 2020. Despite active hog slaughter rates, the ability to clear pork through domestic markets has been impressive through early 2020. | 4) | Strong underlying pressure is developing in pork cutout values going into early February. The concern that increased follow through weakness will further erode wholesale and retail pork values is sparking even more uncertainty Monday morning. |
 |
| #completecalfcare |
No comments:
Post a Comment