Cash cattle markets continue to remain quiet going into Wednesday morning with asking prices and bids still hard to pin down in most areas of cattle country. The delay in cattle being priced appears to be focused on outside market moves as feeders are still expected to price cattle above last week's levels, but they are not going to shoot themselves in the foot in the event that aggressive follow through futures pressure develops in the coming days. Through the morning, it is likely we will see much more pricing activity, although bids may be delayed until either late in the day or further out in the week. Given the aggressive packer schedules planned for this week again, it is likely that packers will need to remain moderately active through the week, but it could easily be Thursday or Friday before trade starts to develop. Futures trade is expected mixed as initial short-covering activity may develop after buyers were unable to hold early gains Tuesday. There is less focus on moving prices higher at this point given the soft movement in beef values and uncertain cash market trade, but the ability to hold prices above last week's lows will remain significant in rebuilding short- and long-term market support. Wednesday slaughter runs are expected near 122,000 head.
Even though lean hog futures closed mostly lower Tuesday, a sense of market stability is developing in the lean hog complex as traders move away from the aggressive market tumble last week. Holding prices above Friday's lows will be essential in sparking renewed late-week buyer support in the hog complex. This would put the support target at $61.60 per cwt in April contracts. The potential to bring light but supportive buyer support back into nearby lean hog futures trade in the next couple of days could help to spark renewed noncommercial trade support through the end of the week. Even though coronavirus cases continue to expand, and most of the new cases are seen in China, the emotional focus in commodity markets has subdued as the panic surrounding the situation has run its course. This will continue to be a major issue affecting the economy and ability to move product around the country and through export channels, but it is likely that the market will start taking any new developments in stride with less emotional reactions than has been seen over the last couple of weeks. Cash hog prices are called $1 lower to $1 higher with most bids expected steady. Slaughter Wednesday is expected at 495,000 head. Saturday runs are expected at 213,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Firm underlying support moved into feeder cattle trade Tuesday. This not only continued Monday's support, but the combined two-day gain in March futures rallied more than $2.50 per cwt. This support is likely to trickle into live cattle futures through the upcoming sessions. | 1) | The long-term focus on increased cattle supply numbers through the spring and summer has traders uncertain of strong nearby support developing across the complex. |
| 2) | Aggressive packer schedules are expected to spark increased need for market-ready cattle through the end of the week. With daily packer runs 3,000 above year-ago levels, the need to keep plants full will likely add to moderate cash market activity through the end of the week. | 2) | Mixed beef values Tuesday left the complex searching for increased underlying support through the complex. This may limit short-term gains in live cattle trade as traders try to focus on stabilizing beef values. |
| 3) | Despite the focus on coronavirus over the last couple of weeks, the impact of African swine fever on global production still remains a major issue that will not disappear in the near future. This remains bullish for domestic pork production as the need for pork in China continues to be great. | 3) |
Continued uncertainty surrounding coronavirus in China leaves increased questions on overall demand support and how this will impact pork exports both short and long term.
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| 4) | Lean hog futures are holding prices above last week's support levels. The ability to continue to keep prices above these levels could quickly spark follow-through buying and increased market stability during early February. | 4) | Strong underlying pressure continued to develop in pork cutout values Tuesday. The lack of support through the week, combined with aggressive losses last week, adds even more concern surrounding long-term support in the hog industry. |
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