General Comments:
Cash cattle sales continue to trickle in through the week with light trade seen Thursday generally steady with the rest of the week trade, which would remain steady with last week's average. Although most trade remained steady at $110 per cwt live and $172 dressed, the development of a few reported sales as low as $108 to $109 live and $171 dressed seem to create uncertainty given the futures market slide that developed over the last trading session. Packers are expected to need to gain access to additional cattle before the end of the week, as next week's cash market activity may remain sluggish due to the Thanksgiving holiday. The weakness in futures prices is partially offset by continued momentum in boxed beef values, which continues to create underlying fundamental support in the entire market. With the Cattle on Feed report released at 2 p.m. Friday afternoon, it is likely that some trade may develop after the report with both sides trying to gain an advantage by the reports impact. Futures trade is expected to remain mixed. Aggressive triple-digit losses Thursday are expected to be moderately overstated given the underlying movement in beef values and generally current market levels. But trade at the end of the week may not focus on logical reasoning given the uncertainty of the Cattle on Feed report and outside market pressure. This could allow for moderate-to-wide price swings in either direction through the Friday session, as traders try to take advantage of recent market swings, but also take protection in front of the afternoon report. The results of the cattle on feed will not be traded until next Monday, leaving concern that the potential for light trade all next week could lead to additional market volatility, sparked by report numbers.
Any sense of underlying market support in lean hog futures seen earlier in the week was quickly dispelled with aggressive losses across all nearby and most deferred contracts. December through August futures all closed with losses of $2 per or greater, although no contracts closed limit lower, leaving current limits in place Friday. Even though pork cutout values bounced higher, the lack of pork export sales to China last week and reported in Thursday's report was viewed as extremely disappointing and created concerns that recently aggressive buying from China may be a thing of the past. Pork prices in China have started to slide lower as more focus on their domestic pork production levels is allowing for more pork available within the country. This has been the plan of China all along, and now that it appears African swine fever is under control in the newly repopulated herds, less U.S. pork may find it into China. China is also becoming more concerned about the potential to spread COVID-19 through meat imports, which may add another barrier in keeping export sales elevated. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady 50 cents lower. Slaughter Friday is expected at 488,000 head. Saturday runs are expected at 278,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Continued support in boxed beef values during the week has offset the bearish movement in futures prices, helping to sustain a bullish fundamental outlook. |
1) | Larger-than-expected cattle on feed numbers in Friday's report could spark additional market pressure across the entire market. |
| 2) | With packers continuing to aggressively source cattle in the cash markets, steady cash cattle trade will be viewed a win Friday given the aggressive market pressure seen in the livestock futures market Thursday. |
2) | Triple-digit losses in all cattle trade Thursday sparked growing concerns that the recent buyer support may be unable to hold given growing uncertainty through the entire market. |
| 3) | Pork cutout values developed Thursday helping to maintain underlying fundamental momentum in the complex. The ability to inch pork prices higher through the end of the month is likely to help bring stability back into the rest of the complex. |
3) | Allegations of plant managers at Tyson's largest pork plant in Waterloo, Iowa, for betting on virus numbers in the plant has put a black eye on not only Tyson, but the entire pork industry and the handling of last spring's outbreaks surrounding COVID-19 levels. |
| 4) | Packer plant speeds continue to aggressively work through market-ready hogs, with the expectation that these procurement levels will continue through the end of the year. |
4) | Aggressive losses in nearby lean hog futures Thursday have broken through support levels, moving to month-long lows in most nearby contracts. This is likely to add liquidation in the complex. |
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| #completeherdhealth |
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