General Comments:
Even though activity Monday is expected to return to the sluggish early week routine, cattle feeders are stepping back into the market with even more intensity and expectations of turning the "Christmas" rally into a "New Year's" rally by the end of the week. Cash cattle trade developed midweek last week like expected, but with live business done at $109 to $110 per cwt, ($2 per cwt higher) and dressed business gaining underlying support at mostly $172 per cwt (as much as $7 per cwt higher), the momentum for higher cash money closing out 2020 is not only possible but is the expectation. Packers will be busy focusing on inventory during the morning with bids and asking prices not likely Monday, but it is expected to be another early week of trade with markets and plants closed on Friday for New Year's Day. The need to buy cattle for full weekly runs during January is sparking renewed optimism through the entire cash cattle market and likely to spill into futures trade during morning trade.
Live cattle futures are expected to be firm to higher early Monday morning as traders return from the Christmas holiday. Although this week will likely see another round of limited futures market movement due to the end of week holidays keeping markets closed, and many traders expanding time off between Christmas and New Year's, the combination of firming cash cattle markets and outside market moves is likely to stimulate early gains Monday morning. With President Trump signing the latest round of Covid-19 relief bill Sunday, the expectation is that widespread outside market support will be seen early Monday, sparking additional buyer momentum through live cattle and feeder cattle trade.
Holiday limited trade activity put pressure on nearby lean hog futures Thursday before the long holiday weekend. This is likely to bring about mixed trade early Monday as traders prepare for what could be another sluggish week of trading due to limited participation and another short trading week. The ability to align firm buyer support in all nearby contracts has the potential to move nearby contracts to month-long highs, sparking renewed underlying activity in the entire complex. This may add further activity levels through the entire complex with traders looking for spillover support from outside markets Monday morning.
With USDA offices closed last Thursday for Christmas Eve, limited cash and meat market reports and information is available, leaving markets searching for additional early morning direction. This could lead to moderately mixed price direction with the focus on Monday's pork cutout and cash hog moves later in the day Monday.
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) | Sharp gains in cash cattle trade last week was a well-earned Christmas gift to feeders. This is expected to spark renewed optimism through the week with additional active gains sought when feeders price cattle over the next two days. | 1) | Shortened trading weeks, and packer runs at the end of the year, will put the focus on trying to keep the market current. This could lead to heavier cattle weights during the month of January. |
| 2) | Firm momentum in live cattle trade is testing long-term resistance levels of $115.27 per cwt. A move above this price level could spark additional technical buying. |
2) | Another round of winter storms moving through the upper Midwest is expected to severely limit cattle gains through the week. This will cause increased cost of gains and delayed deliveries in some areas. |
| 3) | Strong pork demand support continues to focus on the ability to actively move pork product in domestic and export markets. |
3) | Limited support in cash hog prices through the end of the year is creating limited support based on the amount of market-ready hogs in the system. |
| 4) | Last week's Cold Storage report posted the lowest frozen pork supplies in the last 10 years. This tightening of supplies has the potential to spark renewed buyer support based on expected continued movement during early 2021. |
4) | Packer speeds are expected to try to return back to normal following the holiday week. But upcoming winter storm events may create significant challenges in moving hogs and limiting workers at many plants. This could quickly reduce overall daily plant runs through the end of the week. |
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