General Comments:
Cash cattle trade has started to become more active late Wednesday with additional live trade in the South reported at mostly $110 per cwt ($109 to $111). This is steady with earlier week trade and last week's average. While only limited movement is seen in the North at this point, the few deals reported were seen mostly $172 per cwt, generally steady with last week. The ability for feeders to push for higher cash cattle prices at the end of the year will not only depend on the movement in futures and outside markets over the next couple of days, but also the amount of cattle still needed by packers as they move into Thanksgiving week next week. With procurement levels lighter next week, and the following week rolling into December with additional contracts coming due, the potential that packers may limit the amount of negotiated trade over the next couple weeks could also impact overall cash price support. Feeder cattle futures led the complex lower Wednesday and will be closely watched once again Thursday morning as the direction of all cattle markets will likely follow the lead of nearby feeder cattle markets once again. Corn and soybean markets have tumbled lower in overnight trade, giving a potential buying opportunity to cattle traders who have been spooked by the rising feed costs. This may be enough to spark firm buyer support in both live cattle and feeder cattle trade. Traders are also likely to turn their attention to Friday's Cattle on Feed report. Even if feeder cattle placements come in near pre-report estimates at 90.8% of year-ago levels, this would still be the largest month of placements for the year, although it would break away from previous patterns seen over the last few years. Even though live cattle futures have fallen away from recent price gains, the complex remains comfortably positioned well above support levels heading into the end of November.
Mixed trade in nearby lean hog futures late Wednesday once again helped to spread a glimmer of hope that buyer interest has not totally disappeared ahead of the upcoming holiday break next week. Light-to-moderate trade volume is expected to once again be seen early Thursday as traders look forward to the weekly Export Sales report. The focus on potential export sales to China and other Asian partners will be closely monitored as traders look for increased movement through the last quarter of the year. The ability to hold current market ranges through the end of the week will be crucial in sparking renewed buyer interest as traders look toward the month of December. Concern surrounding further pressure in cash hog values and pork prices will continue to limit optimism through the next couple of weeks. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady 50 cents lower. Slaughter Thursday is expected at 491,000 head. Saturday runs are expected at 279,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | The inability to limit buyer support in choice boxed beef prices over the last three weeks has continued to spark optimism across the entire beef complex. |
1) | Sharp triple-digit losses in feeder cattle futures Wednesday was sparked by aggressive gains early gains in grain markets midweek. The focus on increased production costs may continue to be a drag on the entire cattle complex through the end of the year. |
| 2) | Cash cattle trade has remained steady with last week levels during early week deals. As the week continues, feeders continue to aggressively price cattle, which is likely to lead to light-to-moderate price gains Thursday and Friday. |
2) | Deferred live cattle futures posted the most aggressive losses Wednesday. The growing concern that uncertainty about beef demand growth and continued market pressure surrounding COVID-19 will drag well into 2021 is sparking pressure in long-term buying interest. |
| 3) | Traders are looking for active export sales results in Thursday's report. Strong sales of pork to China and other Asian countries as well increased shipment levels of previously sold product would likely help solidify additional buyer support across the entire complex. |
3) | Further pressure in cash hog and pork cutout values Wednesday is creating increased fundamental pressure on the hog complex. The inability to sustain pork values through the end of the month will limit potential commercial buying interest in futures trade. |
| 4) | Packer plant speeds continue to aggressively work through market-ready hogs, with the expectation that these procurement levels will continue to be seen through the end of the year. |
4) | A bearish weekly Export Sales report, with limited sales or deliveries to China or Mexico, will likely spark renewed selling pressure in nearby lean hog futures trade Thursday. |
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| #completeherdhealth |
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