Thursday Morning Livestock Market Summary -Cattle Futures Uneasy On Cash Market Pressure

 General Comments:

Cash cattle market direction has become disappointing to say the least with packers unwilling to increase bids through the first half of the week. The combination of recent futures market erosion and pressure in boxed beef prices led to feeders giving into lower price levels Wednesday afternoon where light trade was reported in several areas. Southern Live trade is reported at $108 per cwt, while Northern Dressed business is reported to be done at $169 per cwt. These prices are generally 50 cents to $1 per cwt below last week's price average and may be enough to set the lower tone for the week. The amount of cash purchases done for delayed delivery over the last month will continue to limit the short-term appetite for packers' need for cattle. But this still does not offset the expectation that cattle numbers will continue to tighten over the coming weeks based on limited spring placements. Pressure developing in live cattle and feeder cattle trade sparked underlying concerns that the limited volume Monday which sparked widespread losses could bring about additional longer-term bearish market shifts as traders remain concerned about the ability to stimulate active beef demand through the end of the year. December live cattle futures closed at $110.27 per cwt Wednesday, although current prices are slightly above initial support levels, longer-term target support levels remain at $107.82 per cwt.

Firm gains in nearby lean hog futures Wednesday did very little to spark renewed confidence through the rest of the complex. December futures remain the spot month contract, and with front month October contracts now officially retired, renewed buyer support quickly moved into the December market, posting aggressive triple-digit gains Wednesday. This market rally in December futures is likely to add more volatility through the end of the week, as traders attempt to bring more unity to the complex over the coming days. The inability to add further price support to pork cutout values may add some additional underlying pressure to both nearby and deferred futures trade. Typically on Thursday morning, traders will be looking forward to the weekly export sales report, but due to the holiday Monday export sales will be pushed back to Friday. Lean hog traders continue to focus on positive export movements, but the question if these sales will be able to push prices even higher is still uncertain as the industry still will struggle with large production supplies through the upcoming weeks and months, with little reprieve expected until early 2021. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady. Slaughter Thursday is expected at 488,000 head. Saturday runs are expected near 252,000 head.

	BULL SIDE		BEAR SIDE
1)	Fed cattle supplies are expected to still tighten during late October and the month of November based on lighter spring placements being worked through the system. This may add underlying support to the complex through the end of the year.	1)	Moderate cash market pressure developed midweek with packers unwilling to increase bids based on expected needs already covered based on active purchases over the last few weeks.
2)	Nearby feeder cattle futures are holding above recent support levels. The ability to maintain this support could quickly signal the seasonal low has been set, sparking renewed commercial buyer interest moving back into the market over the coming days and weeks.	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)	Active gains in spot December contracts continues to test long-term resistance levels, sparking further bullish market shifts in the near future.	3)	Firm pressure in cash hog values is causing underlying concerns that fundamental support may be slipping. This could quickly spark firm pressure to redevelop in the near future.
4)	Traders expect active and strong export sales to redevelop in the end of the week report. This is helping to sustain nearby contract momentum in December through April futures.	4)	Softness midweek in deferred lean hog futures is narrowing the price premium in summer 2021 contracts. Although traders still focus on tighter supplies during the upcoming year, concern of follow through demand growth is limiting buyer interest.