Cash cattle markets are now heading into the home stretch of the weekly sales race with little indication of where markets will end up given the overall lack of activity the last couple of days. It is expected that packers will become more active as previous bids of $120 live and $192 to $193 dressed have gained little to no attention at this point. Asking prices have shifted lower from early-week levels, but are likely to redevelop Friday morning around $123 and higher live in the South and $196 and higher dressed. Light-to-moderate trade is expected to develop through the day, although feeders may be willing to pull cattle off of lists and put them on next week's levels given the recent futures market support and hope that futures market support continues to build through the month of February. Futures trade is called mixed early Friday morning. The moderate support at the end of the day Thursday is a significant improvement from early Thursday losses, but much of the buyer support appears to be spillover activity from the aggressive rebound in lean hog trade. This move higher, could indicate a change in market direction if follow-through support develops across nearby contracts early Friday morning. The ability to defend Wednesday's lows may spark renewed technical market shifts at the end of the week. Friday slaughter runs are expected near 121,000 head.
Lean hog futures are looking for confirmation early Friday morning that the limit gain on Thursday is for real, and not just an emotional market reaction that will be retracted at the end of the week. The combination of bullish weekly exports, China announcing tariff reduction levels, and Tyson Foods reporting that first quarter exports increased 600% to China over year-ago levels helped spark aggressive market support through the complex. All of these things are good news, but it is important not to get caught up in the emotion of it all. For example: it is encouraging that Tyson's exports to China grew by such large amounts. But it is important to remember that a year ago, pork exports to China were essentially zero. Any improvement above nothing amounts to a HUGE percentage gain. But more importantly, the tone of the market appears to have changed, no matter what the factors, which could quickly establish a market low and attract aggressive buying support back into the complex. Due to the limit gains Thursday, lean hog futures will have expanded trade limits of $4.50 per cwt the entire session Friday. Cash hog prices are called $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Friday is expected at 491,000 head. Saturday runs are expected at 216,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Lack of interest in current packer bids the last couple of days is keeping the focus on a late-week cash market rally. Feeders continue to hold elevated asking prices through the end of the week, looking for steady cash market trade..
| 1) | With April live cattle futures still trading below $120 per cwt and near long term lows, the concern that Thursday's gains may falter at the end of the week due to lackluster noncommercial interest through the cattle complex. |
| 2) |
Live cattle futures bounced off Wednesday's lows, potentially signaling a market low has been set this week. Building momentum surrounding expected export trade growth over the coming weeks and continued strong domestic demand is bringing traders back to the table.
| 2) | Active pressure in select boxed beef cuts Thursday creates concerns about the ability to move beef through the complex even at the lower price levels. This may create limited support in the entire complex over the coming days. |
| 3) |
Limit gains have sparked strong technical support in the lean hog complex Thursday. This indicated a market reversal in the complex, which is likely to spark renewed early gains Friday.
| 3) |
Sharp gains Thursday is adding volatility to the complex. Although if markets continue to move higher, this is a good thing, but given the continued weak structure of the market, expanded trading limits also leave the lean hog futures vulnerable to set contract lows once again through the end of the week.
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| 4) | The announcement that Greece has reported African swine fever in the country for the first time continues to create optimism in potential U.S. exports to the world as the disease continues to spread. | 4) | Despite Thursday's narrow bounce higher in pork cutout prices, the sharp losses through the week still leaves additional concerns about maintaining current futures and cash market values in the coming weeks. |
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