With the Oct. 1 Cattle on Feed report now in the
rearview mirror, traders are looking more toward technical support
developing late last week. Triple-digit gains in nearby contracts pushed
December futures above $116 per cwt, this has not only sparked
technical support as prices have broken through May highs, but it could
bring more buyer support to the end of October. There may be increased
underlying support in the complex, although the aggressive market rally
the last two months is leaving the complex vulnerable to a market
correction. Cattle on feed numbers were well within expectations, 1%
lower than year-ago levels with placements at 102% year-ago levels.
Limited morning price shifts are expected Monday as the overall tone of
the report is expected to be viewed as neutral. Cash cattle activity is
expected to remain undeveloped following firm additional gains late last
week. Showlist distribution and inventory taking is likely to be the
extent of market development in the cash market Monday and likely much
of Tuesday. Monday slaughter runs are expected at 117,000 head.
Mixed trade is expected during early week trade
as traders still remain focused on aggressive supply levels through the
end of the year. Plants continue to run at or near capacity with strong
weekend runs across the country. As time passes and market-available
hogs become more manageable, Saturday slaughter numbers will likely to
be the first to drop, followed by plants taking 4,000 to 10,000 off of
daily runs through the week. But we appear to still be several weeks
away from making a major dent in the large supply levels of hogs
available on the complex. There is expected to be some continued
encouragement from the fact that the U.S and China talked late last
week, but once again no major breakthrough was reported. But as long as
both sides continue to show up at the negotiating table, there is hope
for progress. Cash hog values are expected to be steady to $1 per cwt
lower, with most bids expected 50 cents lower. Expected slaughter Monday
is at 489,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Technical buyer interest late last
week has sparked increased support in the live cattle complex. With
December futures at six-month highs, traders look for increased
underlying support late in the week.
|
1) |
At first glance, cattle placement
levels 2% ahead of year-ago levels is expected to be seen as generally
weak. But this is in line with expectations and likely to have limited
market impact Monday morning.
|
| 2) |
Total cattle on feed numbers fell
from year-ago levels with a total of 11.3 million head on feed Oct. 1.
This is 1% lower than last year and continues to point to expected
tighter supplies in the upcoming months.
|
2) |
Late-week boxed beef movement
remained light with prices mixed. The inability to continue to push
wholesale beef values higher on a consistent basis is likely to limit
underlying support in the futures trade during late October.
|
| 3) |
Generally low level talks between
the U.S. and China late last week continues to add confidence in moving
the process down the road. This has shown little short-term results, but
it leaves the door open for additional direction and hope that both
sides will reach a long lasting deal at some point.
|
3) |
Cash hog values continue to steadily
erode as packers try to preserve plant margins by cutting overall
procurement costs through the end of the month. With plant speeds
remaining high, increased focus on limiting cash prices will likely be
seen.
|
| 4) |
Despite limited recent news
concerning African swine fever in China, the country still struggles to
get control of the disease, limiting hog supplies significantly. This
will likely keep China in need of imports of pork over the foreseeable
future.
|
4) |
Lack of indication that China is
willing to actively step into the U.S. market to buy additional and
steady pork supplies is concerning and creating uncertainty about how
talk of "increased purchases of ag products" will ultimately relate to
pork sales to China over the upcoming months.
|
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| #completeherdhealth |
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