Limited activity has been seen and is expected
to be seen through Tuesday in cash cattle markets. Although it is no
surprise that very little interest was shown in cash markets Monday, the
midweek holiday is likely to delay any significant developments in cash
market trade until the last half of the week. Although some cattle may
be priced, and there could be a few bids floated before the end of the
day, both sides appear to be content with cattle sold through the end of
2019, and are willing to push any significant business into early 2020.
The firming tone in the market through the end of the year and
expectations that supplies will continue to tighten over the coming
weeks is likely to point to steady to higher cash values at the end of
the week. But limited overall holiday volume may still subdue most
traders interest. Futures trade is expected to wander in a narrow to
moderate trading range as traders seem to have one foot already out the
door, with limited interest of causing any significant market shift
before the end of the year. This should leave markets generally quiet
through most of the session. Tuesday slaughter runs are expected near
91,000 head as packers head into the holiday break.
Mixed trade is expected early Tuesday as trades
continue to focus on the underlying support being built into the market
based on expectations that a partial trade deal will be signed at the
end of the week. Although there has been no official announcement by
either side, the continued focus that China officials are heading to the
U.S. has sparked support in all nearby lean hog futures during early
week trade. The main focus is being put on February contracts which
posted triple-digit gains Monday and may continue gain support compared
to other spring and summer contracts. Most early 2020 contracts already
have a premium built into the price structure based on trade
expectations planning that a partial trade deal will take place and
China buying of pork will improve significantly over the next several
months. Cash hog prices are called steady to 50 cents higher Tuesday
morning with most bids expected steady. Slaughter Tuesday is expected at
405,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Firming boxed beef values following the Christmas holiday week appears to be helping to build some needed stability across the entire beef complex at the end of the year. | 1) | Despite continued strong cash cattle support over the last month, futures remain stuck under a "glass ceiling" as there remains limited support to break through current resistance levels and move to new contract highs. Continued inability to spark renewed buyer support during the next couple of weeks could quickly erode commercial buyer support through the entire complex. |
| 2) | Expectations of higher cash cattle prices during early January when both sides return from the midweek holiday break is likely to spark underlying support in futures trade. | 2) | Limited holiday trade is likely to keep traders on the sidelines for most of the week. This has the potential to create wide price swings that have little fundamental or technical significance, but can quickly disrupt market direction due to limited trade interest. |
| 3) | The expectations and possibility that a partial trade deal with China may be signed by the end of the week is sparking additional underlying buyer support in futures trade despite limited overall volume going into the New Year's holiday. | 3) | Despite wild expectations of improved China pork purchases over the next few months, the continued growth in the U.S. hog herd will add market ready hogs through most of 2020. This could create significant price pressure if there becomes any delay in China exports. |
| 4) | Even though activity remains limited, the strong push higher in cash hog price Monday is sparking expectations of underlying widespread market support seen through the entire hog complex. This is likely to help stimulate additional cash market support in the next few days. | 4) | Pork cutout values eroded during early week trade. The focus on continued large amounts of pork moving through the system and seasonal domestic demand pressure likely now that the holiday season is wrapping up could put even more short term pressure on pork values. |
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| #completeherdhealth |
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