Additional cash cattle trade is expected to
continue Friday, and some business may be delayed until after the 2 p.m.
release of the Cattle on Feed report. Light-to-moderate gains for the
week in all areas appears to be helping to solidify market support.
Despite the increased offerings of cattle through the week by feedlot
managers, the midweek rally in futures trade and consistent support in
beef values is pointing to underlying cash market support. There was
limited trade in the South Thursday afternoon at $115 per cwt live
basis, $2 per cwt higher than last week, and $175 per cwt higher dressed
basis in the North. This is $0.50 per cwt higher than last week. Asking
prices on cattle left are expected to be near $111 and higher live in
the South and $178 dressed in the North. Traders are looking for
direction from the afternoon Cattle on Feed report, but if final numbers
come in near expectations, limited overall market shifts will be
likely, and could keep prices within the current market range. But this
still will allow for some pre-report adjustments through the Friday
session. Friday slaughter runs are expected at 117,000 head.
Strong pressure in the last week in lean hog
trade continues to create a weaker market tone, although early trade is
likely to remain mixed as traders turn their immediate focus to
end-of-the-week position squaring and potential short-covering in front
of the weekend. Given the wide trading range the last month, the strong
losses of nearly $8 per cwt in December futures and $6 per cwt in
February contracts have not yet triggered technical selling, but
December futures are nearing this level with $64.25 per cwt the target
support level. Continued concern about the development, or lack thereof
in trade with China surrounding the partial trade agreement, and
lackluster export numbers in the weekly report has caused increased
pressure in nearby and deferred contracts. Without China actively
stepping in to purchase large amounts of pork, the hog and pork industry
continues to significantly struggle with a supply issue that is not
expected to go away anytime soon. Cash hog values are expected to be
steady to $1 per cwt lower, with most bids expected 50 cents lower.
Expected slaughter Friday is at 486,000 head. Saturday runs are expected
at 260,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Cash cattle trade started to develop
Thursday. There still needs to be more trade to fill needed procurement
levels, but the tone is improving with prices expected to be steady to
$2 per cwt higher than last week.
|
1) |
Feeder cattle trade has struggled to
follow the strong shift higher in live cattle trade the last week. This
is creating some concern that the upward potential of feeder cattle
markets may remain limited with spot-month futures unable to
consistently move above $145 per cwt.
|
| 2) |
Cattle on feed totals are expected
to slip from year-ago levels with an average estimate of 98.7%. Cattle
marketed in September is also expected to be elevated at 101.2% year-ago
levels. Final numbers in this range would be viewed generally friendly
to the cattle complex.
|
2) |
Seasonal beef demand is expected to
erode the next couple of months with upcoming end-of-year holidays
typically owned by poultry and pork products. This will continue to
limit expanded product movement in the near future.
|
| 3) |
African swine fever continues to
leave a dismantled hog industry in its path through much of Asia. The
continued inability to contain the spread of the disease will keep pork
supplies in tight supply for an extended period of time through the
entire region.
|
3) |
Strong continued pressure in pork
cutout values through the week has added fundamental market weakness to
the complex, which is also dealing with eroding long-term futures prices
based on trade uncertainty.
|
| 4) |
Total open interest has continued to
increase despite the weaker price levels as the recent move lower is
attracting long-term buying opportunities through the entire complex.
|
4) |
December lean hog futures are
testing October lows of $64.55 per cwt, holding just 30 cents above
these prices levels. A move below these support levels would likely
spark additional end-of-the-week liquidation, leaving the next major
support level at $59.95 per cwt set in early September.
|
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| #completeherdhealth |
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