Wednesday Morning Livestock Market Summary - Follow-Through Buyer Support Sought

 General Comments:

Cash cattle interest is expected to improve as Wednesday progresses, following very limited trade scattered through cattle country over the past two days. Tuesday posted limited cash market activity in the North at $169 per cwt. This amount of trade is not enough to establish a good market trend, as most of the heavy lifting of the weekly cattle trade is still yet to come over the next three days. Asking prices were not widely seen in the North, but cattle in the South were priced at $111 to $112 per cwt. The focus on expected tighter supplies over the next few weeks is putting more emphasis on feeder expectations of continued cash market support as packers desire to maintain current procurement levels. Even with the recent slow but stable gains in cash cattle prices, the upward shift is expected to remain generally limited given continued concerns surrounding short- and long-term beef demand growth. Futures trade is expected mixed to mostly higher as renewed underlying support seen Tuesday is expected to spark follow-through buyer support. But even though the tone of the market may continue to move higher, choppy price shifts within the complex are very likely as traders continue to remain cautious about pushing prices too high too quickly given the drag lower of boxed beef values.

Lean hog futures are expected to be mixed to mostly higher during early minutes of trade Wednesday as traders return to the complex following underlying fundamental support being confirmed. The pullback in nearby lean hog futures trade Tuesday continued to focus on widespread market shifts seen over the last several days as traders spent most of Tuesday on position-taking actions. The renewed support moving back into cattle trade is expected to have pulled moderate open interest away from nearby lean hog futures by traders who have entered the hog complex as a shelter from the volatility in cattle futures. The underlying support in deferred lean hog futures combined with strong pork value gains Tuesday points to renewed fundamental support still developing across most lean hog contracts through upcoming days. Cash hog prices are expected $1 lower to $1 higher with most bids steady. Slaughter Wednesday is expected at 486,000 head. Saturday runs are expected near 243,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle trade is expected to post moderate gains once again this week, although commitment to these higher prices by packers is still yet to be seen. The focus on upcoming lighter runs of market-ready cattle will likely keep packers aggressively bidding cattle over the next few weeks, although the majority of sales will likely be delayed to the end of the week.	1)	Boxed beef values continued to bounce higher and lower over the last week, creating concerns that limited sustainable market support may be seen. Traders continue to focus on the uncertainty of beef demand growth given the lack of active food service traffic redeveloping due to continued COVID concerns.
2)	Spot-month November feeder cattle futures have posted firm gains at midweek. The ability to hold prices above support levels of $135.50 per cwt through the end of the week is expected to stimulate additional buyer support through the entire complex, and potentially establish a seasonal bottom to the market.	2)	Nearby live cattle futures remain near short-term support levels with December contract closing at $111.22 per cwt Tuesday. The concern that additional market weakness may have been sparked by Monday's liquidation could quickly limit upward market support in the near future.
3)	Sharp gains in pork cutout values were led by ham cuts surging over $4 per cwt higher Tuesday. The growing focus on holiday demand is likely to continue to spark underlying support for pork cutout values over the near future.	3)	Cash hog values turned lower during the week with packers content with current supply levels. This may limit the need to aggressively bid for hogs through the upcoming days and weeks as prices settle into a narrow but steady range.
4)	Active daily processing schedules (486,000 head per day and higher) combined with an active run each Saturday continues to dispel growing concerns of burdensome hog supply levels through the remainder of the year.	4)	Limited gains in open interest are expected to be seen soon. This is adding concerns that further long-term support and the ability to draw wider commercial and noncommercial interest back to the complex may remain limited over the upcoming weeks. This may quickly curb further price support in nearby lean hog futures.