Cash business has turned into a Friday affair
once again with limited overall packer interest developing the last
couple of days. Although a few cattle sold on a dressed basis at $170 to
$171 per cwt through the afternoon Thursday, there likely will not be
enough cattle traded at this level to establish a good market trend.
Generally, bids have been sluggish in all areas through most of the
week, although feeders have been holding onto elevated asking prices as
they focus on establishing underlying support following the recent
market shift higher the last few weeks. The ability to move prices even
$1 per cwt higher will go a long way in maintaining overall market
optimism going into the heart of October. Futures trade is expected
mixed following a sluggish market move, which contained live cattle
futures in a narrowly mixed range Thursday. Traders continue to focus on
outside market direction as the overall trade talks going on in
Washington, D.C., continue to create hope but uncertainty on further
market direction. The trade talks and potential deals have less direct
impact to the beef industry and price levels, but it will heavily impact
overall economic health of domestic and global markets. This will
impact the overall direction of the market long term. Market reaction to
the winter storms moving through the upper Midwest has been limited at
best as these storms are expected to leave local and regional messes
over the next few weeks, but overall impact on cattle prices and cattle
numbers are still expected to be minimal. Friday slaughter runs are
expected at 116,000 head.
Mixed trade is expected early Friday morning
following a sluggish market shift Thursday that seemed to show little
overall market direction. December futures posted the most aggressive
losses, but this pressure is expected to be based on late-week
positioning rather than overall directional shifts following the strong
upward market moves Tuesday and Wednesday. Export sales to China last
week were positive with over 18,000 metric tons of pork sold. This is
the highest one week sale in months, but yet the market seemed to be
generally disappointed following the expectation and rumors that
"significant" purchases were taking place in early October. The other
growing concern is if these sales were strategically placed as trade
talks got underway in order to help create "goodwill" during the trade
talks. China will likely need pork supplies through the end of the year,
so a lot of attention will be placed on sales over the next couple of
weeks. Nothing earth shattering has developed from the trade talks, but
it seems the mood as of late is that "if they are still talking, it is a
good thing." So we will continue to hope for the best as overall market
expectations seem to be limited for significant progress. But most
expect to see some progress, even if it is to continue talks in the near
future. Expected slaughter Friday is at 484,000 head. Saturday runs are
expected at 287,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Going into the final straightaway of
cash cattle trade, feeders are holding firm to elevated asking prices,
expecting nothing less than steady at this point, with many eyeing a $1
to $2 per cwt gain by the end of the day.
|
1) |
Packers have become resistant to
offering higher prices at this point in the week. Given the overall lack
of direction in live cattle futures and choppy moves in beef values,
packers may be willing to settle for lower cattle purchases in order to
limit cash spending.
|
| 2) |
Firm support developed Thursday in
beef values. This helped to bring stability to the market following
pressure early in the week. The potential to continue pushing beef
values higher may spark increased underlying support through cash cattle
trade late in the day.
|
2) |
The inability for live cattle
futures to break out of the sideways market trend continues to focus on
increased overall uncertainty of further buyer activity.
|
| 3) |
Active export sales to China in
Thursday's report is helping to not only focus on product already sold
but is indicating that continued buying is likely to develop as China
needs access to pork product through the end of the year.
|
3) |
Limited information during the high
level trade talks with China following the first day of negotiations is
creating limited expectations. It is unlikely that everything will get
ironed out with this session, but the concern that no significant
progress will be made could quickly cause lean hog prices to further
erode.
|
| 4) |
Following a volatile week so far in
lean hog prices, December lean hog futures still remain over $1 per cwt
for the week. This upward movement in the complex continues to build
underlying support and expected increased noncommercial buyer activity
through the fourth quarter.
|
4) | The supply of market-ready hogs continues to be abundant, keeping packers processing speeds at high levels. Even with active export sales this week, the amount of product sold to China was viewed as disappointing given the need to move pork supplies. |
 |
| #completeherdhealth |
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