General Comments:
Limited cash cattle market activity is expected once again Tuesday as traders continue to focus on the overall lack of volume last week, and the inability for packers to follow the previous gains in futures trade during late October. Asking prices are still generally hard to pin down, as are packer bids. This could delay active live cattle trade until the second half of the week once again. The widening gap between formula and negotiated cash cattle trade over the last three weeks is adding additional uncertainty to the entire cash cattle market, creating concerns that with rising COVID-19 cases, growing uncertainty about future beef demand growth and continued aggressive plant production could further hinder cash cattle markets during the remainder of the year. Cattle futures are expected to be mixed in a narrow-to-moderate trading range in both live cattle and feeder cattle trade, while the overall focus will continue to remain on the political arena through the day and well into the evening. Outside market direction will likely be a significant point of interest to all traders in the livestock market. Early week trade Monday ranged from moderate-to-firm losses, to light-to-moderate gains through the day and is likely to keep prices moving in an uneven but mixed trading range through most of the morning. Fundamentally, traders are focusing on the ability to maintain early week support in boxed beef values, while closely monitoring the open interest changes. The ability to limit further market liquidation over the next several days will go a long way in helping to develop market stability in both live cattle and feeder cattle trade.
Lean hog futures are attempting to reestablish market stability following the strong pullback in price levels during mid-October. Over the last two weeks, December lean hog futures have been contained within a $1.50 per cwt trading range, as traders appear to be establishing firm price support near $66 per cwt. The lack of follow-through support in pork cutout values is creating additional long-term concerns to the market, but given the aggressive hog numbers available to packers through the end of the year, there is likely to be limited short-term upside market support without significant changes in export demand growth or aggressive gains redeveloping in pork values. Lean hog futures are expected to remain in limbo during the day with traders closely watching election coverage similar to most of the country. This could allow prices to wander within a moderate price range during the next couple of days as overall market fundamentals may not be a significant focus in the upcoming trading sessions. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to $1 lower. Slaughter Tuesday is expected at 489,000 head. Saturday runs are expected at 278,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Boxed beef values bounced higher during early week activity, creating renewed underlying support and hope that additional fundamental buyer support will redevelop over the near future. | 1) | Limited cash market gains in cattle trade given last week's futures market rally is creating significant long-term concerns about the ability to sustain market growth during the rest of the year. |
| 2) | Following a $7 per cwt rally in nearby November feeder cattle futures over the last week, firm buyer support remains well entrenched throughout the market as traders appear to be building on recent market momentum, helping to set seasonal lows, and move onto higher prices through the end of the year. | 2) | Cattle futures are expected to remain volatile over the next couple of days as growing uncertainty over market direction following the election is likely to distract traders from focusing on fundamental or even technical market factors. |
| 3) | Pork cutout values have stabilized during early week trade. This is expected to create underlying support across the entire lean hog complex, helping to regain buyer interest in the next few trading sessions. | 3) | Cash hog values have struggled to find any sense of market stability during early November. This is expected to add further price pressure to cash values as packers limit buying interest but are still maintaining aggressive plant output. |
| 4) | The ability to defend support levels of $66.15 per cwt seen during mid-October in December contracts will be essential to sparking renewed early November buyer support. This could help to rebound price levels over the upcoming week based on expected stability in wholesale pork values. | 4) | Steady pressure in nearby and deferred lean hog futures is quickly eroding price premiums previously seen in summer 2021 contracts. Although hog numbers are still expected to decline in the upcoming months, growing concerns of demand growth in domestic and export markets continue to cast a shadow over the complex. |
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