Monday Morning Livestock Market Update - Christmas Week Arrives Bringing Hopeful Expectations

 General Comments:

Cash cattle trade ended last week on a more positive note than it started, but essentially created a mixed bag with prices mixed to mostly lower in the North. Dressed Northern trade developed at mostly $165 to $168, although the full range was from $162 to $169.50 per cwt. Most prices were steady to $3 per cwt lower. Live trade in the North ranged $1 to $2 per cwt lower than the previous week. Late-week support in Southern live trade solidified at $108 per cwt. These prices are steady to slightly higher than the previous week, but enough to create hope in the market given expectations of lower prices heading into the holidays. Cash trade over the next two weeks could be variable given the uncertainty of packer needs and shortened period for both sides to get needed business done. Limited interest and asking prices are likely to be seen Monday; most business is expected Tuesday or Wednesday this week as both parties are not keen on trying to finish up weekly cash duties on Christmas Eve. The limited number of cattle moving through plants with reductions expected on Thursday and Saturday and plants dark Friday for Christmas will likely reduce intensity in both cash and futures markets trade over the next couple of weeks.

Friday's Cattle on Feed report fell in line with pre-report estimates with on feed numbers at 100% of year ago levels. Although total cattle on feed increased just 5,000 head from year ago levels, the ability to limit feed yard growth beyond seasonal gains is expected to help reduce further market pressure. Placement levels fell as expected to 91% of year ago levels. This is the second month in a row placements have fallen below year-ago levels. Placements have fallen to the lowest level since July, creating the impression that seasonal surges in placements have passed. These reduced cattle placements will impact the market supply through the summer months, pointing to positive price support based on tighter supplies through the middle of 2021. However, no significant short-term relief is expected, from a supply standpoint.

Futures trade is expected to remain firm as spill-over support from Friday's Cattle on Feed report and expectations of further COVID-19 vaccines available will likely spark limited buyer interest early in the week. In general, trade volume is likely to remain subdued through the entire week with some traders already heading out the door for the holidays. This has the potential to create even more market volatility as many times, less trade can spark wild price moves without significant numbers of normal participants to step in and create the much-needed volume to keep markets stable.

Limited trade volume is expected through the week, although the hog complex will be focused on an active menu of reports. Monthly Cold Storage starts the report heavy holiday week Tuesday, followed by the quarterly Hogs and Pigs report on Wednesday. Due to government offices being closed Thursday for Christmas Eve, weekly export sales are also slotted for Wednesday morning instead of the normal Thursday release. Traders are expected to remain relatively quiet through the entire week with limited holiday business likely to be done in the next couple of weeks. But both this and next week are likely to show front-loaded trade interest, which could bring about further market activity. The continued but firm support seen late last week has helped to further distance price levels from recent support levels with traders looking to post month-long highs as February futures test $66 per cwt resistance levels and April futures are heading close to $70 per cwt once again.

Cash hog bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents higher. Monday slaughter numbers are expected near 486,000 head.

	BULL SIDE		BEAR SIDE
1)	Reduced cattle placements in November are expected to spark renewed underlying support through the market, although the main focus will be seen in deferred summer contract months as tighter long-term supplies are expected.	1)	Limited cash and futures interest during the holiday shortened week could limit price support as the volume of traders in the market will remain reduced over the next two weeks.
2)	Southern cash cattle trade ended the week at $108 per cwt. This is steady to slightly higher than the previous week. Given the early week pressure in Northern trade, the ability to rally cash market activity at the end of the week is considered a win for the entire market.	2)	Firm additional losses in pork cutout values signal that most holiday buying is expected to have wrapped up, at least in the wholesale market. This could add further price pressure to several cut segments until early January.
3)	Firm underlying support continues to be built in nearby and deferred lean hog futures. The focus on increased underlying support is helping move nearby futures through short-term resistance levels heading into Christmas week.	3)	Boxed beef values slipped lower in choice cuts Friday, creating concerns that additional pressure may still develop going into the holiday week.
4)	Traders are looking for positive signs in weekly reports which will be condensed in two days before the Christmas break. The combination of monthly Cold Storage, Quarterly Hogs and Pigs Inventory and Weekly Export Sales and Shipments reports is likely to keep buyers active over the next couple of days.	4)	Cash hog prices have been under pressure over the last week. The combination of mechanical and weather issues last week limiting anticipated plant speeds, and holiday closures the next two weeks, is likely to add further cash market weakness until January.