Light-to-moderate cash cattle trade developed
during the day Thursday as both sides appear to be trying to wrap up as
much business ahead of the widespread winter storm system moving through
cattle country Friday. This is likely to impact overall movement of
cattle through the end of the week as well as the ability to sell
additional cattle before the long weekend. Cattle sold generally steady
to $1 per cwt lower Thursday and will likely set the tone for any
remaining cattle on showlists that need to be sold before the end of the
week. Prices in the South were seen at $123 to $124 per cwt, mostly
$124, and steady with last week. Northern dressed cattle held a full
range of $197 to $200, with most selling at $199 per cwt. This is $1 per
cwt lower than last week and will likely limit the upside potential for
any additional selling before the end of the week. Futures trade is
expected mixed but generally weak early Friday morning. Although active
pressure has developed during the trading week, prices are still above
initial support levels, leaving markets hovering in a generally sideways
trading range for now. An effort to cover short positions ahead of the
weekend is likely to bring about limited market gains Friday. Futures
markets will remain closed Monday in observance of Martin Luther King
Jr., creating some underlying uncertainty with a three-day weekend many
times leaving the market generally unsettled. Friday slaughter runs are
expected near 119,000 head.
Triple-digit losses in nearby lean hog futures
continue to focus on the overall uncertainty ahead in the hog and pork
complex. The signing of the phase-one trade deal with China on Wednesday
has brought about increased pressure to most commodity markets as
traders' reactions to what is revealed in the documents was anything but
positive. Although it is totally understandable, and known that
specifics about what and how much ag products would be listed in the
agreement, traders seemed to want more direction than the 94-page
document provided. This has allowed for a strong market tumble the last
two days with prices hovering above short-term support level set last
week. Nearby lean hog futures contracts have fallen nearly $5 per cwt
since the beginning of the year, adding even more bearish undertones
through the entire complex. Even with current losses, prices have not
tested support levels, and remain well entrenched within a sideways
trading range. This may bring some renewed stability Friday as traders
look for additional direction and prepare for the long weekend. Cash hog
prices are called steady to $1 lower with most bids expected steady to
weak. Slaughter Friday is expected at 488,000 head. Saturday runs are
expected at 155,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Some indication of a weather premium is likely Friday as traders focus on the wide winter storm system planted over the Midwest and most cattle feeding areas. This could spark limited, but supportive late-day buying early Friday morning. | 1) | The potential for snow and ice covering many feedlots Friday is expected to create additional challenges for feeding and moving cattle. This may limit the ability to get cattle to packers, as well as reduce gains over the coming days. |
| 2) | Continued strong beef demand in both domestic and export markets are expected to continue well into the spring. The ability to keep moving beef supplies while short-term cattle numbers are still tightening should spark market firmness during the upcoming weeks. | 2) | Continued pressure in feeder cattle trade through the week has created concerns that additional January pressure may quickly develop across the entire complex. |
| 3) | Strong gains in pork cutout values are expected to help bring some needed market stability to the lean hog complex late in the week. | 3) | Lean hog futures remain under strong pressure with triple-digit losses in nearby contracts Thursday adding to general market weakness as traders expect limited long-term support to the complex until actual pork purchases are seen by China. |
| 4) | Lean hog futures trade is ripe for a moderate price bounce following the strong losses the last couple of days. With limited technical pressure and prices holding within a sideways trading pattern, end of week buying is likely. | 4) | Market-ready hogs will continue to limit packers need to increase cash hog values significantly over the near future. Even if renewed support develops in futures trade, packers are not having to look very hard to sustain current plant schedules, limiting upside potential to cash prices through the next couple of months. |
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| /#completecalfcare |
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