General Comments:
Cash cattle activity remains undeveloped and quiet early Tuesday morning. This is no surprise, although with the holiday-shortened trading week, it is likely that more packer interest will be shown Tuesday. Feeders are becoming much more aggressive in pricing cattle this week following the combination of rising beef values as well as strong futures gains Monday. But this may be offset by potential light trade needed to be seen from packers through the week. Although bids were scattered and limited Monday, the fact that initial bids remained steady with last week's price levels initially points to the possibility of market firmness through the next few days. Both sides are expected to try to wrap cash cattle trade up by the end of day Wednesday in order not to resume duties on Friday after the holiday. Feeder cattle futures took the reins Monday, sparking gains near $3 per cwt in most nearby contracts with the focus on underlying outside market support. This is expected to create moderate spillover trade early Tuesday despite the concern that outside market pressure may start developing the rest of the week. With December live cattle futures moving back to $110 per cwt thanks to triple-digit gains Monday, the focus on further underlying buyer support in late November is drawing renewed commercial buyer interest back into the complex. Live cattle futures remain well entrenched within a sideways trading range, limiting expected technical market shifts, but the strength in beef market fundamentals continues to add support to the market. Continued focus on COVID-19 vaccine tests and the possibility for market-ready product at the end of the year is creating some renewed hope that beef demand will improve through the first half of 2021.
Sharp gains continue in lean hog futures Monday, quickly breaking through initial resistance levels seen through the middle of November as traders once again distance price levels away from long-term support levels. The recent market support is likely to be spurred on by tighter pork supplies following Monday's Cold Storage report. Pork supplies in October fell 4% from the previous month, and down a whopping 27% from year-ago levels. This continues to focus on the aggressive movement of pork through the system even though hog supplies remain aggressive. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady 50 cents lower. Slaughter Tuesday is expected at 491,000 head. Saturday runs are expected at 385,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Sharp gains in nearby feeder cattle futures has sparked renewed underlying support through the entire cattle complex. With January feeder cattle leading the entire cattle market higher with gains of $3.22 per cwt Monday, traders look to expand the recent market support. | 1) | Cash cattle markets have lagged the support in futures trade and boxed beef values through the month of November. With boxed beef values gaining over $33 per cwt in the last month, cash values have struggled to move $5 per cwt higher within this period. This may continue to limit upward support in cash values through the end of the year. |
| 2) | Boxed beef values continue to show no sign of letting up as aggressive buying support is seen in choice and select markets. The triple-digit gains Monday added to the building market momentum as choice boxed beef values have rallied $33 per cwt through the month of November. | 2) | Limited trade during the week could limit consistent trader interest, allowing for traders to quickly become spooked by outside markets, leading to potentially wide price swings lower. |
| 3) | Lean hog futures have rallied over $4 per cwt in spot February contracts over the last three trading sessions. The underlying support is expected to bring additional buyer interest to the complex over the next couple of days. | 3) | Active pressure in many outside market commodities during overnight trade is creating uncertainty about additional upward futures moves early Tuesday morning. Typically, holiday weeks like this have a tendency to lead to wide price swings due to limited volume in the market. This can many times disrupt trade patterns for weeks to come. |
| 4) | Pork in cold storage has fallen 27% from year-ago levels with pork bellies falling 57% with in the same period. The aggressive movement of pork through the end of 2020 is helping to spark renewed focus on steady to stronger pork demand as the industry continues to keep up with current commitments. | 4) | Cash hog values have struggled to remain stable despite the active pork movement seen in the cold storage report and need for packers to aggressively keep procurement levels at or near capacity levels. This may limit upward movement in cash prices through the end of the year. |
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