Initial trade is expected to remain sluggish through most cattle markets with cash market interest on the back burner once again with bids and asking prices not expected until near midweek. Showlist distribution and inventory taking is likely to be the main focus Monday morning with feeders attempting to maintain the momentum of last week's higher prices in live cattle trade. Expected larger supply levels through much of the spring and summer months is creating some additional caution with packers attempting to curb cash spending levels due to weaker margins and the lack of significant price improvements in beef values the last couple of weeks. Asking prices are expected to remain elevated when cattle are priced in the next couple of days, but the gap between asking prices and initial bids is likely to remain wide, with potential active trade not seen until the last half of the week. Futures are expected mixed following the moderate-to-strong pressure last week in spot April live cattle trade. April live cattle futures fell $2.08 per cwt from the previous Friday, taking out most of the early February rally. Although April futures are still holding above support levels, and February lows at $117.17 per cwt, the concern that follow-through pressure early in the week could further weaken the entire complex. A move below support levels through the end of the month would likely stimulate additional active liquidation despite the direction of short-term fundamentals. Lighter-than-expected placements during the month of January remain the bright spot of the market, indicating that tighter supplies of feeder cattle to place into feedlots remain the main focus, helping to build long-term support back into the overly sold cattle complex. Monday slaughter is expected near 121,000 head.
Mixed trade is expected during initial activity Monday as traders continue to struggle with the ability to spark aggressive buyer support given additional questions of coronavirus impacts across the world. Although the number of cases reported and daily deaths is starting to slow, the concern of the long-lasting impact on the economy remains significant. The fact that the virus is impacting normal daily activities not as much because of the number of people infected, but the attempt to keep the virus from spreading, is touching every part of local and national economies through China and other countries in the world. Limited fundamental support is expected to continue to slowly develop during early week trade with traders focusing on long-term demand growth while domestic pork supplies still remain abundant. Cash hog prices are called 50 cents lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Monday is expected at 495,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle placement of feeder cattle in January fell 1% from year-ago levels. This reduction of new cattle in feedyards signals tightness of cattle available on farms and ranches as has been expected the last few weeks. Cattle placements fell nearly 2% below previous trader expectations. | 1) | Even though larger cattle on feed supplies were expected, the fact that cattle inventories are still 2% above year-ago levels is likely to limit aggressive buyer support through the end of the month. |
| 2) | Light late week support slowly developed in boxed beef values Friday. This is helping to limit the underlying pressure in the complex as traders look for additional demand support in the next four to six weeks. | 2) | Cash cattle prices remained steady to $1 per cwt higher last week. Although higher money is positive, this move higher is considered disappointing given the tighter supplies through the first quarter of the year and limited price support the past several weeks. |
| 3) | Pork cutout values bounced higher through the end of last week. This increase in pork prices is expected to help create additional momentum through early week trade based on short- and long-term demand growth in domestic and export markets. | 3) | Cash hog values have slowly eroded through the end of last week. This is creating concerns that additional weakness may develop through the end of February in both cash and wholesale pork values. |
| 4) | Despite strong U.S. pork supplies it is important to remember that China and other Asian markets continue to be plagued by lower production due to African swine fever. Even though the focus has been on coronavirus, the need to supply food for these pork-dependent countries will help to create long-term demand support. | 4) | Continued concerns of coronavirus heavily impacting the Chinese economy may severely limit the expected pork buying activity in the coming weeks and months. |
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| #completecalfcare |
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