Cash cattle trade remains quiet going into midweek with bids and asking prices still not too active. It is expected that live asking prices in the South will remain at $110 and higher, while more Northern dressed asking prices will be seen through the morning. At this point, it is uncertain if packers will show much interest this early in the week or wait until the tail end of the week. There is the potential that active trade will be delayed until after the Cattle on Feed report on Friday afternoon. Futures trade is expected mixed with limited market direction likely through morning trade following the inability to retest resistance levels in either feeder cattle or live cattle trade early in the week. The monthly Cold Storage report released Tuesday afternoon posted total beef stocks falling 1% from month-ago levels, while supplies have tumbled 8% from last year's levels. This indicates that strong clearance is continuing through the end of the third quarter. Wednesday slaughter runs are expected at 117,000 head.
Continued pressure is expected to develop midweek as traders continue to grapple with the potential of current and upcoming export sales, especially to China. The announcement that China had issued tariff-free imports for soybeans, but no mention of pork left traders feeling slighted early in the week, and continues to raise questions about China's intentions of buying U.S. pork. Thursday's Export Sales report will be closely watched for an increase in export amounts, but also for overall domestic demand through the end of the year. Pork supplies in the October Cold Storage report posted inventory levels 598.9 million pounds, which is 1% lower than last month, but 2% over year-ago levels. This continues to focus on consistent clearance despite the aggressive supply of market-ready pork available to the market. Cash hog values are expected to be $1 lower to $1 per cwt higher, with most bids expected steady to 50 cents lower. Expected slaughter Wednesday is at 489,000 head. Saturday runs are expected at 253,000 head.
| BULL SIDE | BEAR SIDE | ||
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Firm underlying support in beef cutout values is expected to help create fundamental confidence through the live cattle complex, focusing on the ability to spark renewed consumer support early in the fourth quarter.
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Despite live cattle futures holding prices near the top of the recent trading range, there is more concern that these price levels may serve as a ceiling, with growing resistance to break above $114 per cwt in December contracts. This could lead to follow-through pressure through the end of the month and early November.
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| 2) |
Beef inventories slipped from month- and year-ago levels in Tuesday's Cold Storage report. This indicates limited supply tightness developing through the end of September, which continues to support increased demand despite the aggressive beef cutout gains over the last couple of months.
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The lack of futures support through the week could hinder cash market support, with packers still unwilling to aggressively step into the market, looking to curb spending increases over the last several week.
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Pork inventory fell 1% from August levels as increased product clearance continues to keep pace with the aggressive supply of market-ready hogs. This is likely to add limited stability and assurance that demand remains relatively strong.
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Sharp losses in wholesale pork values and cash prices early in the week is sparking increased underlying pressure in the lean hog complex. This could cause weakness in futures trade early Wednesday morning.
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Lean hog traders continue to look for support in Thursday's Export Sales report and hope for continued strong export news from China over the last week. A strong export number would likely give more confidence that continued buying is developing.
| 4) | Growing concerns that China will not be a consistent buyer of U.S. pork, despite their need due to African swine fever, is creating concern that long-term price support may be limited. |
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