General Comments:
Cash cattle trade continues to remain in catchup mode following the aggressive gains in futures trade and boxed beef rally. It appears that the cash market is not disappointing as the week draws to a close. Trade Thursday developed at $110 to $111 per cwt live basis and $172 to $174 per cwt, with more trade in all areas expected through the day Friday. These gains represent a $3 to $4 per cwt rally in live cattle and dressed cattle moving mostly $7 per cwt higher from last week's average. Continued underlying support in boxed beef values and the focus on potential further gains during the end of the year is offsetting the current supply of cattle available on the market and pointing to firming longer-term momentum in the complex. Even though cash cattle market developments have been the highlight of the market over the last couple of days, the ability to maintain live cattle and feeder cattle futures in the current price range will be viewed as a generally bullish market indicator as traders look for potential follow-through support over the next couple of weeks. The ability to maintain upward price momentum in boxed beef values will continue to be the main driver in sparking renewed buyer support across the entire complex. Feeder cattle futures are becoming more confined in a narrow price range with all nearby contracts stuck within a $1 per range near $140 per cwt. Traders continue to balance the live cattle and fed cash market support against the elevated feed prices and higher production costs moving into 2021.
Lean hog futures continue to look to expand Thursday's gains as traders focus on the potential to establish slow but steady growth across the lean hog futures complex through the near future. December contacts, which posted a $1 per cwt gain Thursday will continue to be the main focus of the complex as traders look for confirmation that additional buying interest will move into the market late in the week, confirming support levels across all nearby and most deferred futures contracts. If trade volume remains light Friday morning, it is very possible that a combination of spillover buying and late week contract positioning may keep markets mixed heading into the weekend. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady 50 cents higher. Slaughter Friday is expected at 484,000 head. Saturday runs are expected at 278,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong and aggressive cash market gains continue to be the headline of the cattle market Friday morning as the ability for feeders to maintain elevated asking prices has sparked active gains in all areas, with additional gains possible Friday. | 1) | Feeder cattle trade continues to be hampered by elevated grain prices and higher feed prices. This continues to add uncertainty about further gains in futures or cash feeder cattle prices through the upcoming weeks. |
| 2) | Choice beef cutouts continue to surge higher during the last two weeks. Cutout values have rallied nearly $20 per cwt since late October, causing traders to wonder if this momentum will continue through the Thanksgiving Season. | 2) | Even with strong weekly cash cattle gains, the current price average remains well below year ago and three-year average price levels. Even though momentum is building, the concern that market discounts will be carried into 2021 could continue to keep gains limited. |
| 3) | Active gains in nearby lean hog futures has created underlying momentum in futures trade despite the limited support in cash and wholesale pork values. The ability to hold spot contracts above $65 per cwt, is likely to stimulate limited but supporting buying interest late in the week. | 3) | Light-to-moderate pressure in cash hog and pork cutout prices Thursday is adding increased weakness to the entire complex. This may add even more pressure to the complex over the near future. |
| 4) | Weekly Export Sales report were delayed due to Wednesday's Veterans Day Holiday. Traders are looking for direction from pork export sales and deliveries with China purchases watched very closely through the end of the year. | 4) | Nearby lean hog futures continue to hold just above support levels. The lack of underling support in cattle trade has been unable to gain similar market momentum and support in hog futures, leaving prices vulnerable to a late month market retraction. |
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| #completeherdhealth |
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