General Comments:
The overall lack of activity in Southern cash cattle trade this late in the week is somewhat unusual, as prices in the South have typically developed well before Northern trade over the last few weeks. But as of Thursday morning, there is limited interest in Southern live trade, although asking prices seem to be holding around $110 per cwt. Dressed trade in the North was reported Wednesday afternoon at $165 to $167 per cwt. This is generally $3 to $5 per cwt lower than last week's market average. These prices are also about $1 to $3 per cwt below the low end of the market last week, indicating that if additional trade develops at these prices, a definite break lower in price levels would be realized. At this point, it is not certain if cash business will remain active in the South until sometime Friday as feeders are hoping to get support from lower placement levels. But given the general tone of cash markets so far, and eroding support in boxed beef values, it is expected that cash markets will end up firmly lower for the week unless significant market shifts develop over the next two days. A much-needed market rally developed midweek in nearby live cattle and feeder cattle trade. This moved February live cattle futures 90 cents higher, closing at $113.77 per cwt. A move above $114 per cwt would signal a technical shift higher, creating the potential for increased underlying buyer support ahead of Christmas week. Spot-month feeder cattle futures still remain $1 per cwt under short-term price resistance, but a rally of nearly $4 per cwt over the last week remains impressive and is rebuilding underlying support in all contracts.
Narrow losses in lean hog futures Wednesday created a sense of caution in the lean hog complex, although the majority of the recent market rally remains intact. At this point, the focus on the midweek price dip is being attributed to position taking as markets test short-term resistance levels. The stability in cash hog prices, which developed a narrow to moderate bounce higher in pork cuts seems to be limiting aggressive market pressure at the end of the week. Traders will continue to focus on the underlying moves in nearby lean hog trade as markets open Thursday, but the premarket release of weekly Export Sales reports will be closely monitored. Traders are looking for additional direction from China purchases last week as an indication of continued active movement as the year comes to a close. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents higher. Thursday slaughter numbers are expected near 491,000 head. Saturday runs are expected at 369,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Active gains in spot-month February live cattle futures Wednesday is sparking renewed interest in the entire complex. A move above $114 per cwt before the end of the week would likely stimulate additional technical support heading into Christmas week. | 1) | Active pressure developed midweek in cash cattle trade. Although at this point, Northern trade developed $3 to $5 per cwt lower, limiting activity in the South. But if these price trends continue, this will remain disappointing given the current support in futures markets. |
| 2) | Trader estimates for the upcoming Cattle on Feed report expect total cattle placements at 91% year-ago levels. This would indicate a significant shift lower through the year and help to tighten ready cattle supplies through the third quarter of next year. |
2) | Boxed beef prices still have not signaled a market bottom is in. Although daily losses have been reduced significantly from the aggressive triple-digit pressure over the last couple of weeks, the potential for further price weakness going into the holiday weeks continues. |
| 3) | Sharp gains in ham cuts midweek helped to push ham prices nearly $7 per cwt higher for the day. This helped to offset moderate pressure in most other cuts, adding to a 72-cent gain in total cutout values. |
3) | With the exception of aggressive gains in ham markets as late holiday buying continues, pressure in most other pork cuts points to limited support in late December in pork values. |
Cash hog values stabilized Wednesday. Although the hope for firmly higher prices continues, the break away from the steady run of lower cash prices day after day is a very good signal that points to firming market factors in the near future. |
4) | A lackluster export sales number Thursday morning, and especially limited China sales could quickly put pressure on lean hog futures prices. This move could end the recent market rally seen over the last week. |
No comments:
Post a Comment