Thursday, August 15, 2019

Thursday Morning Livestock Market Summary - Continued Short-Covering Expected

GENERAL COMMENTS:

Light trade through the South developed Wednesday afternoon with prices generally $105 per cwt live. This is $5 per cwt lower than last week, and may set the tone for the weekly market trend given the early week pressure in futures trade. Limited activity developed in the North with prices around $170 per cwt. The amount of volume in the North is not enough to establish a good market trend, but it did get the ball rolling for the week as both sides slowly stepped up to the plate. Additional trade is expected to develop in the next two days. Even though packer interest should improve significantly Thursday, given the volatility in both futures trade and wholesale beef values, feeders seem to be in little hurry to make deals at the lower price levels. Futures trade is expected to be generally higher with follow-through support likely after the midweek rally. Feeder cattle futures hit limit gains at closing bell, allowing another day of expanded trade limits of $6.75 per cwt. It is likely that markets will be much more subdued than Wednesday levels, as traders try to reestablish more realistic market norms given the lower plant capacity over the short and long term. Growing concern of overall economic support and follow-through pressure in stock markets may limit upside market support through the end of the week also.

Early trade in lean hog futures is expected to be mixed Thursday morning following strong triple-digit gains in nearby futures midweek. Continued underlying buyer support is expected through the end of the week, although the overall tone of the market remains weak based on overall uncertainty surrounding export pork trade and prices hovering within the lower end of the trading range. Increased focus will be placed on the weekly Export Sales report, Thursday morning before markets open. Traders are not only looking for and hoping for some additional sales to China, but also focusing on any news of cancellations or recent shipments of previously-sold pork. The ongoing African swine fever situation in the country continues to create a need for pork in China, but the trade issues and current relationship will continue to be a major barrier to move U.S. pork into China. Cash bids are expected $1 lower to $1 higher with most bids steady. Expected slaughter Thursday is at 477,000 head. Saturday runs are expected at 128,000 head.


BULL SIDE BEAR SIDE
1)
Sharp market support in feeder cattle trade Wednesday sparked renewed interest in the cattle complex. This is sparking some additional positive moves in all cattle markets through the end of the week.
1)
Despite the market shift higher Wednesday, cattle futures remain at the lower end of long-term trading ranges. This could limit continued follow-through support through the end of August.
2)
Wholesale beef values have exploded higher this week. This has significantly improved packer margins the last couple of days. The improved margins are expected to stimulate all packers to increase chain speeds in order to take advantage of these margins in the near future.
2)
Growing concerns of weakness in domestic and global economic growth could quickly spark limited upward market support in beef trade as high-end beef product demand traditionally follows general economic support. This may add even more uncertainty to cattle trade in the coming days and weeks.
3)
Triple-digit gains in nearby contracts helped renew active support in the complex. Front-month October futures posted a $2.20 per cwt rally, sparking increased support in the complex.
3)
Pork values continue to slowly erode following limited support in several primal cuts. The inability to show consistent demand growth in the pork complex is causing concerns about future market suppor.
4)
Recent pressure in grain markets is expected to help stabilize production costs in the near future. This will improve producer margins even when lean hog futures continue to show significant price support and hover near long-term contract lows.
4)
October lean hog futures remain at six-month lows due to uncertainty about exporting pork to countries affected by African swine fever because it will limit overall demand, but trade issues with China continue to cloud the air also, hampering an increase in export demand to many areas in the region.



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