General Comments:
Cash cattle trade has been slow to develop through the week, although a few sales have trickled into the market in both Northern and Southern cattle country. Prices have settled generally steady to $1 per cwt higher than last week live and as much as $4 per cwt higher dressed basis. Additional trade is expected to develop through the day Friday, but without a significant shift in futures trade or beef values, it is unlikely there will be additional upside cash cattle market moves before the end of the week. With the tone likely being set going into Friday morning, it is uncertain just how many additional cattle will be purchased, leaving the potential for another light list of cattle sold. Even though packers continue to focus on keeping packer schedules active, the aggressiveness in buying seems to have quickly changed over the last couple of weeks. Given the lack of aggressive packer interest for large amounts of cattle this week, feeders will have to face the dilemma once again of whether to let cattle go at current bids, or hold cattle for another week, with the hope and expectation that higher prices will develop later in the month. Futures trade continues to regain market support with live cattle futures expected to shift higher based on firming boxed beef values. Even though moderate-to-strong buyer support in live cattle trade continues, the aggressive gains in grain and feed prices has caused a pullback in feeder cattle futures, with higher production costs quickly eroding previous price support on cattle going into feedlots.
Lean hog futures continue to gain active buyer support as traders are steadily moving back into the market with additional funding not seen in the last couple of weeks. December lean hog futures have continued to distance themselves from recent lows and could use this movement to establish seasonal lows. Over the last two days, spot December lean hog futures have posted a $2 per cwt market rally, helping not only to set a firmer tone of the market, but to spark additional underlying buyer support. Strong gains developing in pork cutout values has not only renewed underlying buyer support on futures trade, but the fundamental support in the complex is regaining market momentum lost through the last half of October. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to firm. Slaughter Friday is expected at 484,000 head. Saturday runs are expected at 261,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong underlying support in boxed beef prices have continued to develop through the week. The move higher is helping to spark renewed optimism in the entire fed cattle complex, with the expectation that further meat price support is likely despite growing coronavirus numbers. |
1) | Gains in steer carcass weights released in the "actual cattle slaughter" report Thursday sparked concerns of growing supplies. Steer weights moved to all-time highs at 931 pounds, increasing 2 pounds from the previous week. |
| 2) | Spot December live cattle futures have posted an impressive $5 per cwt rally over the last two weeks. The ability to maintain this building market support during the next week is expected to stimulate additional price support through the holiday seasons. |
2) | Cash cattle prices have been slow to develop and have not kept up with the active price support in futures and boxed beef values over the last two weeks. This is creating further distance between the markets and causing significant concern about the ability to move prices higher at the end of the year. |
| 3) | Additional aggressive gains flooded into pork cutout values Thursday afternoon. The renewed momentum in pork prices has helped to create a more optimistic outlook heading into the Thanksgiving season.
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3) | Cash hog values have been slow to react to the recent increases in pork prices and futures trade. This adds further concern that packers may start to become less aggressive in buying heading toward the end of year holidays. |
| 4) | Triple-digit gains in nearby lean hog futures trade has stimulated additional commercial and noncommercial interest to actively step back into the complex. The focus on nearby contracts able to hold prices above $66 per cwt will be essential to spark renewed late week buyer interest. |
4) | The outlook for active price gains through next summer seems less optimistic than it did over the past several weeks. Despite continuing a firm price premium in deferred futures, the concern of domestic and global demand growth over the next year seems to be limiting long-term buyer support. |
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