Friday’s Cattle on Feed report is expected to be viewed generally neutral as placements, marketings and total cattle on feed came in near expectations. The underlying weakness developing in the hog trade should be closely watched as technical selling could easily develop early in the week.
Cattle: Steady Futures: Mixed Live Equiv $143.33 -0.50*
Hogs: Steady Futures: Lower Lean Equiv $ 82.37 -1.39**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Friday’s Cattle on Feed report came in as close to expected as realistically possible with placements, marketings and total cattle on feed numbers just a fraction of a percent away from early pre-report estimates. The focus on growing placement numbers and growth of feedlot supplies during the month of December is no surprise to the industry.
The fact that these larger supplies will likely heavily impact supplies through the last half of the year continue to create a reality that even greater beef demand will be needed through 2020 to maintain current price levels.
Cash cattle trade last week started to develop midweek, as prices ended the week following limited clean up activity through the rest of the week. This left prices steady with the previous week at $124 live in the South and $199 dressed in the South.
The overall lack of support in cash cattle markets through the month of January is disappointing given the aggressive need for packers to find market-ready cattle through the supply-tightened first quarter. Although packers are expected to still remain aggressive in fueling active slaughter rates, the concern is that recent weakness in futures trade and lackluster boxed beef values may cause limited cash market erosion through the upcoming weeks.
Futures trade is expected mixed in a limited trading range early Monday morning. Although Friday’s Cattle on Feed report comes in as expected, the strong growth in placements and overall cattle on feed numbers is still a hard pill to swallow, and is likely to carry some negative price implications early Monday morning. Monday slaughter runs are expected near 121,000 head.