Wednesday, November 21, 2018

Wednesday Morning Livestock Market Summary - Sluggish Pre-holiday Trade Expected

GENERAL COMMENTS:

Cash cattle activity remains at a standstill going into Wednesday morning with packers and feedlot managers unwilling to show their hand at this point. But with both sides betting on getting business done by the end of the day, it is expected that activity through the day will be much improved. Although asking prices are still not easy to pin down, the expectation that most cattle will be priced at $117 and higher live and $178 to $180 dressed. If deals cannot be done by the end of the day, both sides will step back into the market Friday, this could significantly disrupt Black Friday plans, which may not bode well for price levels at that point. Futures trade is expected to remain mixed to mostly steady early in the session as traders seem unwilling to jump on the selling bandwagon following sharp outside market losses. Trade through the rest of the week is expected to remain sluggish.
In the hog trade, early bids Wednesday are expected to remain in a similar range as earlier in the week with bids $1 per cwt lower to $1 per cwt higher. Most bids are expected to remain steady to weak with the recent market pressure in futures trade and tumble in pork values weighing on packers intentions. With packers schedules remaining light due to plants closed Thursday, the availability of market-ready hogs will increase through the week. Futures trade is expected to remain mixed in a moderate range with a combination of follow-through selling met with short-covering stepping into the market before the holiday break. Total slaughter schedules for Wednesday are expected to be around 477,000 head. Saturday runs are expected at 361,000 head.


BULL SIDE BEAR SIDE
1)
The Thanksgiving holiday on Thursday will limit time packers and feedlot managers have to mull over cash market activity. The need and desire to secure active trade before the break is likely to stimulate increased buying activity given the stability in futures trade.
1)
Lack of support in boxed beef values through the week has created questions of additional buyer support and potential cash market strength not only in late November, but through the end of the year.
2)
Firm futures support has held in nearby live cattle trade with front-month December contracts holding firm above the $115 per cwt mark. This has moved over $1 per cwt higher in the last week, helping to establish strong support levels at $114.50 per cwt.
2)
Feeder cattle futures have continued to lead the cattle complex lower as traders have broken away from the direction of feed markets and overall production costs, and been heavily influenced by outside market pressure.
3)
Nearby lean hog futures have rallied over $6 per cwt the last two weeks, breaking through short-term resistance levels as traders focus on the potential for continued strong demand through early 2019.
3)
Aggressive outside market losses, which pushed the Dow Jones Index down 551 points and falling well below 25,000 points, is starting to impact potential buyer support across lean hog futures. This quickly pulled contracts off of recent market gains Tuesday, and may continue to erode market activity the rest of the week.
4)
Despite the sharp losses in lean hog futures this week and tumble lower in pork cutout values, cash hog values remain solid based on packers desire and need to gain access to additional hogs and keep up with strong pork demand.
4)
Sharp losses in pork primal cuts Tuesday has adjusted overall trade direction and the potential for market stability. Sharp losses of $11 per cwt were seen in belly cuts, while most primals posted triple-digit losses. They pulled $3.09 off of the pork cutout value, creating additional concerns moving into the rest of the week.

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