Cash cattle trade started to develop Thursday
with prices generally $1 to $2 per cwt higher than last week. Prices in
the South are listed at mostly $120 per cwt live, up $1, while Northern
dressed trade is mostly $192 per cwt, a $2 per cwt bounce from last
week's levels. It is likely that some additional trade may develop, and
quite possibly following the afternoon release of cattle on feed
numbers. But unless a major disruption is seen in futures trade or there
is an unexpected shift in the Cattle on Feed report, the tone of the
cash market is likely to have already been set by Thursday's trade. The
upcoming holiday weeks will limit packer activity through the end of the
year. Futures trade is expected to be mixed as traders not only focus
on what could be sluggish trade volume through the end of the year, but
late adjustments to the afternoon Cattle on Feed report is likely to
cause some light-to-moderate morning price adjustments. No major shifts
are expected in the afternoon Cattle on Feed report with early estimates
for placements increasing 0.9% over last year, while total on-feed
numbers are expected 1.9% higher. If reports come in near expected
levels, the immediate impact on the market may be limited, although it
does continue to point to growing numbers of market-ready cattle through
the middle of 2020, which could limit long-term price support. Friday
slaughter runs are expected at 118,000 head.
Firm follow-through support is expected to
develop in lean hog futures trade early Friday morning following the
rebound in February futures Thursday, which sparked underlying support
in the complex. Although February futures posted triple-digit gains
Thursday, the rest of the complex struggled to find active buying as
traders continue to hold prices within the wide sideways trading range.
With trade volume expected to remain limited through the rest of the
year due to the upcoming holidays, there could be limited short- and
long-term direction across the complex. There is continued underlying
support following the announcement of the partial trade deal last week,
but statements that details of the deal may be released next month are
giving little incentive for buyers to quickly move into the market given
the many unknowns of this deal. Cash hog prices are called steady to
$0.50 per cwt higher Friday morning with most bids expected to be
steady. Slaughter Friday is expected at 489,000 head. Saturday runs are
pegged near 345,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Stronger cash cattle trade on Thursday is supporting the complex as traders continue to focus on buyers' needs to gain additional head through the holiday weeks in order to keep plants running at desired levels. The focus on tighter cattle numbers in early 2020 continues to spark expectations of price support. | 1) | Continued pressure in boxed beef values Thursday sparked underlying uneasiness in the complex as traders focus on strong wholesale beef losses through the last half of the week. This lack of support is likely to limit end-of-week buyer interest even if beef values stabilize Friday. |
| 2) |
Nearby live cattle futures continue
to hover near contract highs. The price erosion through the last few
trading days does not take away from the fact that with February futures
above $125 per cwt, prices still remain well above levels seen all year
long.
|
2) | Cattle marketings through the month of November is expected to be nearly 3% below year-ago levels in the afternoon Cattle on Feed report. This lack of movement of cattle off of feedlots could spark some uncertainty through the entire market if marketed numbers do hold well below year-ago levels. |
| 3) | Firming underlying demand for pork continues to develop, which is helping to sustain futures prices well above short-term support levels through the end of the year. | 3) | Cash hog prices and wholesale pork values both slipped lower Thursday, sparking underlying fundamental weakness leading into the holiday weeks. |
| 4) | Continued moderate-to-strong export sales and shipments for the current 2019 year were reported this week to China. This continues to help spark the expectation that China interest in U.S. pork will continue to grow through early 2020. | 4) | With only two weeks left to report export sales in 2019, there is still 100,000 metric tons of current year pork commitments to China that have not been shipped. Given that shipments last week totaled 15,300 metric tons, the likelihood of meeting these commitments before the end of the year is limited. This could create large cancelations over the coming weeks. |
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| #completeherdhealth |
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