General Comments:
Moderate trade seen Wednesday sparked increased widespread interest across the entire cattle complex with feeders unwavering in their demands going into Christmas and able to post strong weekly gains before calling it a week. It is expected that business will be done in most areas, although the possibility for a few leftover deals may be seen if anyone is around to pick up the other end of the phone Christmas Eve. Live trade developed from $109 to $110 per cwt, with most business at $110 per cwt. This is $2 or more higher than last week. Dressed trade in the North developed at $168 to $172 per cwt with most trade nearing the $172 per cwt levels. These prices are seen $2 to $4 per cwt above last week's market movements, and sparked renewed optimism that quickly carried over into the futures complex. At this point, any cattle left over on showlists are likely to be held over until next week with higher price tags hung around their neck given the building market support.
Boxed beef values did weaken as the pre-holiday market support was not carried over to the wholesale beef complex. Although this is not expected, as limited buying interest is seen before the Christmas holiday, the focus on price weakness could cause some uncertainty Thursday morning in nearby futures trade. Choice cuts led the market lower, falling $3.13 per cwt, creating limited underlying concerns that a bottom may not be established just yet. With USDA closed for the Christmas holiday, boxed beef reports will not be released Thursday, leaving limited market direction as very few traders have stuck around anyway.
Live cattle futures are expected to remain lightly traded Thursday morning with markets closing early due to the abbreviated holiday trading schedules. The strong upward momentum seen in futures and cash market trade Wednesday will likely help to stimulate follow through buyer support early in the session. But the few traders who are planning on remaining active in the market may be looking for positioning opportunities. The day before a major holiday is always uncertain as prices tend to either barely move and markets remain extremely quiet, or wide price swings develop. At this point, we won't know which kind of Christmas Eve this will be for cattle futures until opening bell.
Active gains quickly developed in lean hog futures trade Wednesday afternoon. The focus on reduced pork supplies in freezers, combined with strong underlying support in all livestock trade helped to curb any concerns through the complex as February futures led the market higher with a $1.87 per cwt gain. Light trade is expected Thursday, which is likely to spark renewed support through the complex heading into the weekend. But mixed market moves may redevelop as very limited trade volume through the holiday-shortened trading session could bring renewed volatility across the entire complex.
Hog inventory levels as of December 1 fell 1% with 77.5 million head in the nations hog herd. This is the lowest number since June and follows the expected market contraction seen over the last few months. Report totals fell in line with pre-report estimates, which is likely to create limited reaction to the report. Farrowing intentions will be the biggest shift in the report, with December through February farrowing intentions expected at 102%, which is above estimates. Although this may not have significant short term market implications or immediate market impact, it does indicate that larger supplies are likely to redevelop through the end of 2021 and beyond.
Renewed holiday supported gains developed in pork cutout values Wednesday, leading to the potential for underlying fundamental support through the end of the year. With government offices closed, the lack of meat value data released Thursday will cause some uncertainty of market direction until next week.
Cash hog bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents lower. Thursday slaughter numbers are expected near 262,000 head. Saturday runs are expected at 68,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Sharp gains in cash cattle trade Wednesday was a well-earned Christmas gift to feeders, as the resolve to higher asking prices paid of ahead of the long holiday weekend. |
1) | Midweek losses in beef cutout values was a unwelcome surprise given the support through the rest of the complex. The inability to hold recent support levels through the end of the year could quickly unwind futures gains seen during the week. |
| 2) | Active triple-digit gains in live cattle futures sparked renewed buyer support through the lightly traded holiday week. With trading hours shortened Thursday, market support is expected to be carried over to the complex. | 2) | Lackluster beef exports last week continues to create uncertainty and concern about potential market support during early 2021, especially to normal export trade partners. |
| 3) | Spot February lean hog futures have tested December highs following an aggressive triple-digit rally midweek. This move higher could spark renewed pre-holiday buying, further pointing to market firmness at the end of 2020. |
3) | Cash hog prices continue to erode as packers are gearing up for a slow next few days of packer activity. With Thursday's plant runs significantly reduced due to Christmas Eve, and normal activity not expected until Monday, packers are able to find adequate market ready hogs at lower prices through the holiday weekend. |
| 4) | Active gains redeveloped in pork cutout values on the last day reports will be listed for the week. The ability to stabilize pork cuts heading into Christmas break is likely to add market support early next week also. |
4) | Higher than expected farrowing intentions over the next quarter are likely to limit overall herd reductions seen through the year. This could limit long-term market support in all hog trade. |
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