General Comments:
The tone of cash cattle trade appears to be set following early week trade in the South. Additional activity continues to trickle into all areas with prices at $110 per cwt live and mostly $173 per cwt dressed basis. This would be steady with last week's levels, creating a lack of support from the cash side of the market despite the strong weekly support in futures and boxed beef value. Feeders will become aggressively focused on elevating cash values next week as asking prices are likely to see significant jumps, while many appear unwilling to accept the growing narrative that packers have enough cattle currently purchased in order to limp into the cash market by with a steady to weak price tone. There will also be increased focus on the afternoon Cattle on Feed report. Although most analysts don't expect major shifts in overall cattle on feed or placement levels, the number to watch will be the cattle placement number. Average estimates are for a 3% decrease in placements from year-ago levels, which could help to show further tightness in supplies hitting the market in the second half of the year. Ultimately many market watchers are already looking past this report, as many have already factored in the fact that cattle placements may be lower due to cattle producers delaying sales into the new calendar year due to tax issues, while elevated feed prices are not expected to have as much of an impact in placements in December as January. Nonetheless, traders will closely monitor placement numbers, which could shift market direction early next week. Live cattle futures quickly broke through long-term resistance levels of $119.50 per cwt Thursday, spending time trading above the $120 per cwt threshold, although falling slightly before the closing bell. April futures closed at $119.95 per cwt, which is the highest daily close in April contracts since February. The focus on underlying fundamental support driven by active boxed beef values and continued strong demand for beef despite restrictions has continued to focus on potential upward movement in the coming days. Although cash values have been unable to closely follow the support in futures trade, the ability to bring about increased open interest and draw additional traders into the complex during early 2021, is creating moderate-to-strong optimism through the entire complex. Boxed beef prices posted active triple-digit gains in choice and select cuts. The combination of moderate-to-active movement during January and the elevated price levels is helping to spur further fundamental support across the entire complex. Even though seasonal tendencies point to lower beef values during the first quarter of the year, it is fair to assume that 2021 may not follow historical trends, creating hope that renewed underlying support will continue to develop.
Strong buyer support continues to develop in lean hog futures trade with April futures moving to short-term highs of $73.90 per cwt at closing bell. Although the contract set contracts highs near $75 per cwt during the Thursday session, the inability to hold this aggressive buyer support through the end of the trading day pulled back from this aggressive market threshold. Even at current price levels, the ability for the entire lean hog complex to aggressively respond to the firming fundamental and technical market factors is helping to spark renewed interest through the entire complex. All but spot February futures closed firmly higher Thursday, pointing to follow-through buyer support early Friday. Traders will also be assessing the delayed release of the weekly Export Sales report. With the focus on export sales and shipments to China during early January, this could help to set the tone for further market moves over the next couple of weeks. A strong gain in pork belly cuts, helped to secure additional upward movement in the entire pork cutout value. Pork bellies rallied $13.23 per cwt during the day. Ham and belly cuts have been extremely volatile over the last month with ham cuts holding a $36 per cwt trading range, while belly market ranges have been well over $150 per cwt. This incredible variability in the market is currently helping to support overall price levels but is also creating questions of market sustainability through the rest of the year. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents higher. Friday slaughter numbers are expected near 494,000 head. Saturday runs are expected at 328,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Sharp price pressure in corn futures trade during the overnight market is helping to draw additional support to further gains in feeder cattle futures Friday morning. |
1) | The inability for cash cattle prices to follow the futures and boxed beef values higher is creating additional concerns that wider basis levels may continue in the upcoming weeks. This could further damage feedlot price levels despite the surging market interest. |
| 2) | Traders are looking for a bullish Cattle on Feed report with placements expected to see the biggest change of the report, falling 3% from year-ago levels. This would further confirm the supply tightness in the market through the last half of the year. |
2) | If feeder cattle placement levels or on feed numbers come in higher than expected on the afternoon Cattle on Feed report, active market weakness could quickly develop early next week. This could quickly offset previous market gains, putting the emphasis back onto feed price moves. |
| 3) | April lean hog futures continue to test long-term resistance levels and contract highs at the end of the week. A move above $174.50 per cwt at closing bell would likely spark renewed active support through the end of January. |
3) | Pork traders will closely be watching the morning weekly Export Sales report. Disappointing export sales, and specifically limited sales to China could quickly limit further futures support through the end of the week. |
| 4) | Belly cuts led pork values higher with a $13.23 per cwt price surge Thursday. The aggressive wide market swings, but active buying interest in pork cuts is pointing to aggressively building demand in all segments. | 4) | April lean hog futures have surged higher through the week, posting an unchecked $2.50 per cwt gain over the past three trading sessions. Despite the underlying support from technical and fundamental factors, a possible market correction should not be overlooked. This could give traders an opportunity to square positions at the end of the week without changing the long-term direction of the market. |
No comments:
Post a Comment