Friday Morning Livestock Market Summary - Hog Market Fundamentals Continue to Strengthen

General Comments:

Cash cattle sales continue to slowly develop through the last half of the week with trade Thursday primarily focused on Northern cattle sold. Prices remain consistent and steady with trade seen earlier in the week and are generally $1 per cwt lower than last week. Southern live trade remains at $108 in most areas, while dressed business is reported from $165 to $168 per cwt, with most trade at $168 per cwt. Moving forward, the break in upward market momentum will likely continue to be a significant factor in the direction of trade through the end of October. Although cattle supplies are expected to tighten from now until the holiday seasons, the limited support in boxed beef values and fact that packers have made significant purchases for delayed deliveries over the last few weeks could limit further price gains in the next couple of weeks. Futures trade is expected to remain under pressure. The move below $110 per cwt in spot December contracts is expected to spark further pressure as traders look for support levels during October. The next significant support level remains at September lows near $108 per cwt. It appears there is enough underlying technical and fundamental support to keep prices above this level over the near future, but a move below these levels would open the door for additional widespread pressure. A combination of follow-through selling and short covering is expected to be seen early Friday morning, although the inability to sustain substantial buyer interest in the first hour of trade is likely to limit the upside movement in the complex before the weekend. Traders are still looking for strong export sales result in the delayed weekly report which will be released during the morning.

Strong underlying support continues to develop in nearby lean hog futures trade following the inability to curb buyer support in spot December contracts. Although December futures still contain a moderate discount to spring contracts, the ability to post additional triple-digit gains Thursday afternoon is focusing on growing support through the fourth quarter. Aggressive gains in pork cutout values Thursday combined with expectations of a very strong weekly export sales report is helping to line up further possible market moves and stimulate short-term market support. The fact that deferred contracts traded steady to lower Thursday is creating some underlying concern through the market as traders lack the consistent market direction at the end of the week, which is typical for a fully bullish market shift. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to firm. Slaughter Friday is expected at 482,000 head. Saturday runs are expected near 261,000 head.

	BULL SIDE		BEAR SIDE
1)	Nearby feeder cattle futures continue to slowly but steadily move away from recent lows. The ability to hold prices above $135.50 per cwt in November contracts should spark renewed long term buyer interest through the entire complex.	1)	Continued pressure in nearby live cattle futures is causing further concern through the entire cattle complex. Price losses Thursday have broken through short-term support levels, opening the door for further possible liquidation.
2)	Traders are focusing on potential strong export sales of beef in the holiday delayed weekly report which will be released before markets open Friday morning. The ability to expand trade levels to both regular and newfound trade partners will help to expand longer-term market stability in the beef complex.	2)	Boxed beef values continue to slowly but steadily erode with growing concerns that additional pressure may develop over the near future in futures and cash values.
3)	Traders are anticipating a very active and positive export sales report Friday morning. Due to Monday's holiday, the report is delayed from Thursday to Friday, which has only built more anticipation in what many expect will be increased pork sales to several trading partners.	3)	Lack of active buyer support in deferred lean hog futures during late week trade is causing limited concern that further long term strength may still be hard to find during early 2021. This could flatten the price curve over the next couple of months, limiting expected long term profitability.
4)	Pork cutout values surged higher following a $13.65 per cwt rally in ham values Thursday. The aggressive rally in pork cutout values is sparking strong underlying fundamental support as buyers actively look to purchase holiday needs.	4)	With great anticipation pointed to the Friday release of weekly export sales reports, anything but huge export sales to China and several other normal trading partners will likely create late week softness in futures prices.