Monday Morning Livestock Market Update - Early Cattle Trade to Focus on Late Week Gains

General Comments:

Following moderate-to-firm cash price pressure in all areas last week, both sides are not expected to quickly dive back into the market without focusing on the outside market directional moves and potential shifts in live cattle market shifts during early trade Monday. Cash cattle trade posted firm losses last week with southern live trade seen at $106 to mostly $108 per cwt. This is generally $2 to $2.50 per cwt lower than the previous week. Dressed deals were at mostly $168 per cwt, falling $4 per cwt from the previous week's average. These swift shifts lower despite futures prices bouncing back at the end of the week will continue to limit underlying support to the market through most of December. Aggressive losses developed in beef cutout values, creating concern that further price pressure will be seen in beef markets over the near future. As weak as beef market fundamentals have been over the last couple of weeks, continued hope of better tomorrows has also stepped into the market with aggressive gains in live cattle and feeder cattle futures trade helping to spark renewed interest in the complex. This move higher has once again pushed nearby live cattle futures above the 100-day moving average. This is a level that has been hard to support over the last couple of months but is helping to stimulate long-term market changes through the entire complex. February live cattle futures have rallied $2.50 per cwt from recent lows set during the middle of the week, as more focus moves away from the number of new COVID-19 cases and on the ability and pace on which vaccines can be distributed and given.

Lean hog markets posted significant pressure Friday as traders quickly backed away from recent support levels earlier in the week. The lack of spillover support from the cattle complex seemed slightly strange as traders focused on technical pressure developing across the entire complex. Although February futures were able to defend November support levels of $63.05 per cwt Friday, the sharp triple-digit losses, which moved the spot month contract to $63.22 per cwt once again put these market supports in danger. Similar to the cattle markets, futures trade has moved in the opposite direction late last week as meat values are creating growing uncertainty between technical and fundamental market support. This will be closely watched through the next couple of weeks, and more specifically in the upcoming days as this week will be the last week of active trade for 2020 with Christmas and New Year's holiday's disrupting future activity levels. Cash hog trade bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents lower. Friday slaughter numbers are expected near 492,000 head.

	BULL SIDE		BEAR SIDE
1)	Strong underlying support in nearby live cattle futures moved prices back above the 100-day moving average of $113.15 per cwt in February futures. This technical support moving in the cattle complex is helping to offset pressure in cash and beef prices.	1)	Continued pressure in beef values as cutout values continue to tumble lower, is creating underlying weakness in market fundamentals. This may continue to leave beef markets uncertain through the holidays.
2)	Active support in all feeder cattle trade is once again moving the attention away from short-term market shifts and current COVID-19 case numbers, with more focus and intense buying being placed on long-term market moves. This has helped to spark active support in all spring and summer contract prices late last week.	2)	Despite the need to aggressively move cattle through feedlots through the end of the year, the reduced plant schedules in two of the next three weeks will significantly hamper trade and packers' need to source additional cattle in the next month.
3)	Strong developing support in pork cutout values over the past two days has helped to stimulate the expectation of active product movement and longer-term market stability will develop despite the late week weakness in futures trade.	3)	Lean hog futures have quickly eroded over the last two weeks, with February futures tumbling over $5 per cwt since the first of the month. The inability to hold above $63 per cwt is likely to spark renewed liquidation through the complex.
	The rollout of Pfizer's COVID-19 vaccine over the weekend will continue to gain increased attention. This has the potential to quickly change long-term demand support for meat products through early 2021 if early vaccinations can quickly reduce the surge in cases seen over the last month.	4)	Cash hog values continue to struggle to maintain previous market support. The active packer volume is unable to keep bids moving higher given the holiday upcoming holiday schedules and reduced packer throughput through the end of the year.