Friday Morning Livestock Market Summary - Growing COVID Cases Pressure Meat Market Outlook

 General Comments:

Cash cattle trade was light to moderate Thursday, following the same mixed and choppy pattern that developed earlier in the week. Northern dressed trade developed at $172 to $174 per cwt, steady with earlier week trade, but $1 lower to $1 higher from last week's levels. Southern cash sales are reported at $109 to $110, steady to $1 lower than Wednesday trade, but still within the $1 lower to $1 higher range from last week's price levels. Although the focus on steady-to-higher prices will continue to be the focus short-term, the bigger long-term concern is where "average prices" develop for the week. The late week pressure in all cattle market sectors is pointing to the expectations that cash market weakness will be seen once all cash sales are tallied for the week. This could continue to weaken the underlying support through cash markets and cause some further market erosion heading into late December. Triple-digit losses in nearby live cattle and feeder cattle futures Thursday afternoon sparked renewed underlying pressure through the entire market. With further weakness in boxed beef values realized and growing concerns of rising COVID-19 numbers and record case related hospitalizations, the concern moves to short- and long-term demand for beef. The food service sector has held the brunt of beef demand losses through the entire pandemic, and the potential for further restrictions on restaurants is likely to put additional demand on beef and overall meat demand through the end of the year and well into 2021. Elevated feed prices continue to be a major issue facing feeder cattle trade with no significant relief in sight, sparking renewed pressure in nearby and deferred feeder cattle trade. Despite the growing fundamental concerns, with live cattle and feeder cattle futures still well established in the top end of recent trading ranges, technical support remains firm in the cattle complex, likely limiting late week pressure in all markets.

Spillover pressure from cattle trade Thursday sparked limited but extremely noticeable pressure in the lean hog complex. Traders remain concerned about the ability to grow short-term pork demand with the growing COVID-19 cases through most areas of the country and the potential impact this may have on food service demand as well as retail activity in the coming days and weeks. Unlike cattle trade, which was heavily impacted in nearby and deferred futures, losses in hog trade was focused on spot month February contracts, with steady-to-higher prices developing in later end months of the complex. The inability to bring consistent support to pork cutout values as prices continue to gyrate higher and lower in a very wide and volatile range is likely to spark renewed concerns through the end of the week. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady 50 cents lower. Slaughter Friday is expected at 489,000 head. Saturday runs are expected at 307,000 head.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle futures continue to remain at the top end of the trading range with most of the market rally holding through early December. January feeder cattle futures remain $14 per cwt above seasonal lows seen in mid-October with expectations that the current upward trend will hold.	1)	Boxed beef values continue to shift lower. With each additional day of lower cutout prices marks the potential that the aggressive beef market rally over the last two months has come to an end.
2)	Despite recent market pressure it is important to understand that live cattle futures remain well rooted within a strong sideways market trend. Prices remain over $2 per cwt above initial support levels, creating the potential of market stability in the near future.	2)	Record number COVID-19 cases and hospitalizations in many areas of the country is creating concerns that increased restrictions will be put in place in the near future. Any restrictions on food service and restricted movements by consumers would likely have the greatest impact on beef demand of all meat markets.
3)	Nearby lean hog futures remain in the top end of the market range, with prices still well above support levels. This is likely to spark renewed buyer support, which has continued to develop during late November and early December.	3)	Sharp pork price losses developed late Thursday. Not only is the lower price levels a growing concern through the entire market, but the inability to limit further market losses is adding concern of additional market erosion through the month of December.
4)	Strong domestic pork demand continues, helping to keep supplies and commitments generally tight through the end of the year. The ability to continue to sustain active consumer demand, especially in the retail sector will continue to stabilize near-term price levels.	4)	Nearby lean hog futures have quickly pulled back from resistance levels in nearby futures trade, the combination of wide-ranging pressure in cattle trade combined with building pressure in cash and meat values is creating further market weakness at the end of the week.