Limited interest is expected in cash cattle activity Monday with any activity confined to inventory taking and showlist distribution. Cash cattle trade late last week was a quick affair after finally developing midday Friday. Live trade sold at mostly $121 per cwt, falling $1 per cwt from the previous week, while dressed cattle in the North posted sales prices of $193 per cwt. This is a $2 per cwt loss from the previous week. The firm pressure the last two weeks is creating some concern that additional weakness may develop through the month of February. But feedlot managers that are still showing limited overall market-ready cattle numbers over the next few weeks are likely to show little interest in offering cattle at lower prices. It is likely that the light-to-moderate trade expected last week will indicate that some of last week's offerings will be relisted this week in the attempt for market stability in the near future. Limited direction from asking prices and bids are likely until near midweek. Futures trade is expected mixed early in the week with traders attempting to build off of the light-to-moderate momentum late last week. If traders are able to defend last week's market lows set Wednesday, limited technical support is likely to develop through the complex as traders move back into the complex and try to establish longer-term support levels. The late-week pressure in feeder cattle futures is a concern because traders have been unable to sustain the late January rally that seemed to rekindle hope. Monday's slaughter is expected near 122,000 head.
Lean hog futures have rallied over $4.50 per cwt in nearby contracts the past two trading sessions. Although additional concerns surrounding coronavirus in China and other areas of the world have increased uncertainty of overall pork demand, reports that the virus is not likely to stop China from importing pork has limited the aggressive market pressure. Even following the recent market rally, lean hog futures prices are depressed thanks to the $14 per cwt price tumble in lean hog prices in the last week of January. Technically, this market shift at the end of last week indicates a bullish market reversal, which is expected to gain additional underlying support due to hog prices remaining oversold. Cash hog prices are called $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Monday is expected at 496,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Generally mild weather conditions through early 2020 across most feedlot regions has allowed for improved rate of gain and increased efficiency of cattle. This is likely to help maximize output and generally lower production costs through the upcoming months.
| 1) | Continued weakness in cash cattle trade last week is bringing concerns that the expected support through the first quarter of 2020 based on lighter cattle numbers may not materialize. This could limit upside potential in cash and futures trade over the near future. |
| 2) |
Live cattle futures continue to hold above long-term support levels from the end of last week. The expectation that increased commercial and noncommercial interest moving into the complex may help build on this futures price support during the upcoming weeks is adding limited optimism to the complex.
| 2) | Beef values continue to show little market support as prices eroded once again Friday. The limited ability to sustain wholesale prices and overall beef demand while cash prices are slipping lower is adding even more concerns to the direction of the entire complex. |
| 3) |
Sharp gains flooded into lean hog trade late last week. This regained active buyer support and is likely to add additional momentum to the entire lean hog complex.
| 3) |
Despite the strong late-week gain in lean hog futures trade, the market still remains depressed following the January losses. The ability to regain most of these losses could be extremely difficult in the near future.
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| 4) | Despite growing coronavirus concerns, the expectations that strong export trade to China will still develop has brought firmness to the hog market. This may continue to rebuild price support into the already oversold lean hog complex. | 4) | As case numbers and death toll of coronavirus continues to grow, especially in China, the focus on overall economic stability in the country and ability to meet export intentions in the near future is a major concern that will be watched closely over the coming weeks. |
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| #completecalfcare |
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