Cash cattle markets are slowly rolling into the last half of the week with both sides focused on extending their positions the next couple of weeks. Feeders still remain aggressive, with asking prices of $121 to $122 per cwt live in the South and $192 dressed in the North. Given the recent erosion of beef values and packer margins the last couple of weeks, it is likely that packers will be willing to let off on the throttle a little through the next couple of weeks. This could result in steady-to-lower cash cattle prices. The carrot of tighter supplies during early 2020 still remains strong incentive to put as much beef in coolers as possible, as packer margins still remain respectable. But this could change the recent direction of higher cash business in the upcoming weeks. Futures trade is expected to be limited as follow-through buyer support is likely to slowly step back into the complex following the sharp triple-digit rally in feeder cattle trade. The strong pullback in corn futures Wednesday allowed for increased focus on nearby and deferred feeder-cattle buying. This underlying support trickled through the live cattle market, helping to bring life to what had been a sluggish market affair for most of the week. It is uncertain just how much short-term market support remains in the complex, as limited interest is expected as the holidays quickly approach. Thursday slaughter runs are expected at 121,000 head.
Limited interest is expected early Thursday morning with the main focus at opening bell surrounding any significant changes in export sales to China in the upcoming Export Sales report. Given the moderate-to-strong sales in the previous two weeks, there is starting to be some increased momentum in the report, especially as China had announced last week that it will roll back tariff levels on certain pork imports from the U.S. The expectation is that China will continue to need to step up and buy additional pork from the U.S. the next couple of months, as the ability to increase imports from other trading partners seems to be limited by their overall supplies. But with the current trade negotiations going on, it is uncertain just how aggressive China will be over the short term. Limited movement Wednesday in futures trade may be the general tone of the market through the end of the week with traders focusing on limited changes in overall fundamentals through the end of the year. Cash hog prices are called steady to $1 per cwt higher Thursday morning with most bids expected to be steady to 50 cents higher. Slaughter Thursday is expected at 493,000 head. Saturday runs are expected at 308,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Feeder cattle futures surged higher Wednesday, sparking potential upward support through the end of the week. Although strong corn market pressure midweek seemed to be the main driver of recent gains, spot contracts set new December highs Wednesday, creating additional technical support through the rest of the week. | 1) |
The consistent day-after-day pressure in boxed beef values is generally concerning to the entire complex. At this point, futures and cash markets appear to be showing little concern, but the inability to hold beef values through early December adds concern for further market support.
|
| 2) | Expectations of steady-to-higher cash cattle trade through the end of the week have cattle feeders still pricing cattle aggressively higher. The desire to gain access to additional cattle in order to keep plants running at or near capacity through the end of the year may spark increased cash market support the next two days. | 2) |
The inability to show significant beef export sales in the weekly report may start to create some softness through the beef complex leading into the holiday season.
|
| 3) |
Continued upward movement in cash hog values is sparking increased underlying support in the lean hog complex.
| 3) |
The fear that China will not be a major destination for pork last week in the morning export sales report could add increased weakness to the futures complex through the end of the week.
|
| 4) |
All eyes will be on the weekly Export Sales report Thursday morning. Not only will traders be watching overall export movement last week, but focused intently on China's involvement for not only current year sales, but also 2020 commitments.
| 4) |
Single-digit gains in pork cutout values are not a necessarily bad sign, but given the firm underlying support in cash markets, these type of numbers are not going to show significant support in the lean hog complex. Traders are looking for more aggressive gains in wholesale pork prices heading into the holidays.
|
 |
| #completeherdhealth |
No comments:
Post a Comment