Light-to-moderate trade developed in the South
with live cattle selling at $118 to $119 per cwt, mostly $119 per cwt.
This is generally a $1 per cwt rally from week-ago levels with
underlying support in the cash cattle trade as packers continue to move
to a more normal packer schedule. With Tyson's Kansas plant now
partially back online and ramping up production to normal capacity over
the near future, the need to gain access to additional cattle will
likely bring support to cash cattle trade. Although packer margins have
eroded over the last week, they still remain impressive and should keep
packers running at full throttle in order to take advantage of current
margins. Additional cash cattle trade is needed, especially in the
North, with packers only showing moderate interest up to this point, but
the expectation is that prices will need to be steady to $2 per cwt
higher in order to get needed business done. Futures trade is expected
mixed-to-moderately higher as follow-through support from Thursday's
gains is expected to slowly move into the complex at the end of the
week. Friday slaughter runs are expected at 119,000 head.
Firm pressure in lean hog futures trade Thursday
quickly pulled back from previous market optimism midweek. The
expectation that the roller coaster price shifts will continue through
the end of the week, and likely well into the month of December could
keep prices volatile and traders on edge. Although overall hog weights
are slowly falling due to seasonal factors, market-ready hogs still
remains strong. This will continue to be heavy through the end of the
year. Continued uncertainty surrounding trade issues with China
continues to leave the market unsettled. Although statements over the
last couple of days focusing on China's dedication to move forward with a
phase one trade agreement, there has been very few details of progress
being made. Not only are current tariff levels a major issue in moving
forward in the trade agreements, but the next round of impending tariff
levels is just around the corner and scheduled to be instated Dec. 15.
This could add even more uncertainty in the near future. Cash hog prices
are expected to bounce higher in active trade Friday. Slaughter Friday
is expected at 490,000 head. Saturday runs are expected at 325,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cash cattle trade has started to develop with Southern live trade generally $1 per cwt higher than last week. This points to renewed expectations of follow-through cash market gains during early December. | 1) |
Weakness in feeder cattle futures is
causing some underlying concern that short-term upside movement may be
limited. The inability to gain additional buyer support at the end of
the week could leave feeder cattle trade stuck within the wide sideways
trading range in the upcoming days and weeks.
|
| 2) | Increased plant capacity and continued strong packer margins are expected to keep packers bidding aggressively through not only the end of the week, but most of December. This is likely to help support futures trade based on underlying fundamental support developing in cash cattle trade. | 2) | Continued pressure in boxed beef values have eroded some of the support in cash cattle trade. The inability to hold wholesale beef values going into the Christmas holiday season may spark underlying bearish concerns in the next several weeks. |
| 3) | Steady gains in cash hog prices this week have added fundamental support. This may continue to spark steady-to-strong buyer activity in the coming days.. | 3) |
Strong triple-digit losses in summer
lean hog futures continue to add to the concern that markets may remain
stuck in the lower end of the trading range through the end of the
year, and well into first quarter of 2020.
|
| 4) | Active packer activity this week is causing large daily plant runs, which when combined with a strong 325,000 expected run on Saturday, could push weekly pork slaughter near 2.8 million head. | 4) | Despite packers maintaining aggressive schedules and holding slaughter at or near record numbers, the amount of market-ready hogs available remains strong. This is likely to curb upward market support in the near future. |
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| #completecalfcare |
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