Cash cattle markets still remain dead in the
water following a typical Monday of showlist distribution and inventory
taking. Although it is expected packers already have the majority of
next week's abbreviated processing needs scheduled, the focus on filling
delivery slots for early January is going to create some incentive for
packers to make use of the Christmas week. Even if light to moderate
trade does develop, it is uncertain and generally unlikely that either
side will be willing to rush into inking any deals on Christmas Eve,
given there are two full days of business and full packer runs at the
end of the week. I would expect most packer interest and cattle pricing
will be delayed until Thursday or Friday. Futures activity is expected
to remain mixed in a narrow trading range Tuesday. With markets only
trading through the morning and on an abbreviated holiday schedule,
there will be many traders who opt to stay out of the market, further
limiting potential price moves. Although the limited expected volume in
the complex could add some volatility, as many times futures move in
uncharacteristic directions given the lack of activity around the
holidays. Tuesday slaughter runs are expected at 65,000 head.
Another lackluster trading session is expected
in lean hog futures Tuesday morning as traders seem to have one foot
(and maybe even more) out the door ahead of the Christmas holiday. The
announcement Monday that China would reduce tariff levels significantly
on over 850 products, including frozen pork, for all of its trading
partners gained little traction through the Monday session. This is
mainly due to the overall lack of volume in the market. But the
underlying firm fundamental news still could spark some limited buying
activity during the holiday shortened trading schedule. With Tuesday
being a Federal holiday and USDA not releasing any daily cash market
information, the hog complex will likely be most impacted due to the
amount of cash and meat market reports that are seen daily and used by
traders. The expectation is that markets will continue to roll along in a
generally stable pattern until Thursday, although trade volume all week
is expected to be limited. Cash hog prices are called steady to $0.50
per cwt higher Tuesday morning with most bids expected to be steady.
Slaughter Tuesday is expected at 150,000 head. Saturday runs are
estimated at 415,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Sharp pre-holiday gains in boxed beef values developed Monday. Triple-digit gains in both choice and select cuts are expected to spark underlying support through the holiday-shortened trading schedule. | 1) | Despite lower year-over-year beef supplies in freezers, a strong bounce from last month's levels continues to indicate beef was harder to move at higher prices seen in November. This could continue to limit overall movement through the end of the year, even though wholesale beef values have adjusted lower in the last couple of weeks. |
| 2) |
Beef in freezers fell 7% from year
ago levels in November according to the latest Cold Storage report
released Monday. This indicates continued strong clearance and tighter
supplies of product compared to 2018.
|
2) | Limited trade volume and a shortened holiday schedule is expected to keep most traders out of the market until after the Christmas holiday. And even then, limited volume is likely until after the first of the year. This could create market volatility which may defy fundamental and technical market indicators. |
| 3) | Pork supplies fell 7% from previous month levels in the latest Cold Storage report. This indicates a short-term break from the glut of product available on the market and active fourth quarter movement, with a portion of this movement designated for exports to China. | 3) | Total hog numbers as of Dec. 1 increased 3% from year ago levels with a total of 77.3 million hogs in the nation's herd. This increase in herd size continues to focus on readily available pork supplies which will likely continue to keep market prices subdued. |
| 4) | Cash and pork cutout values bounced higher early in the week. This is helping solidify fundamental support across the lightly traded lean hog complex during Christmas week. | 4) | Limited expansion is still expected during early 2020 with farrowing intentions in December through February expected to be 1% higher than current year levels. This will continue to build on the expectation that additional long-term support will develop, but could cause short-term pressure to the complex. |
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| #completeherdhealth |
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