Tuesday Morning Livestock Market Update - Fundamental Market Pressure Continues

 General Comments:

Activity in the cash cattle markets remain at a complete standstill going into Tuesday morning. Although showlists appear to be larger in all areas this week, it is still uncertain just how aggressive packers will be and how many cattle will need to be purchased in the negotiated market heading into Christmas week. Even with an attempt to bolster packer activity the next three Saturdays to help minimize the impact of plants remaining dark or having limited runs during the holidays, the net impact will be a significant pullback in cattle moving through the system. At least a portion of this market reduction will be seen in this week's sales volume as most packers are not yet aggressively buying for the first couple weeks of January at this point. Asking prices may start to become more evident through the day, although bids are likely to be few and far between if even available over the next couple of days. Active trade is likely to be pushed off until Thursday or Friday. Narrowly mixed trade seen Monday seemed to catch some traders off guard given the previous market support and lack of follow-through support in the market. Following the technical gains seen last week, there is still potential to expand recent market support as traders seem to have hit "pause" early in the week instead of making any significant market decision. This leaves live cattle and feeder cattle in a dangerous position over the next couple of days. Following the lackluster market activity and seemingly sluggish interest in the complex, traders could easily renew the upward buyer support based on outside market support and technical interest, or could buy into the aggressive fundamental pressure which still continues to develop in beef values through mid-November. This directional shift is likely to be evident through the first couple of hours Tuesday and could easily set the tone for the rest of the week.

Aggressive support in nearby lean hog futures Monday sparked active interest in all lean hog futures trade. With triple-digit gains able to hold at closing bell in February and April contracts, the focus on moving spot-month February futures back above the $65 per cwt threshold has not only sparked technical buyer support but is helping to create much needed stability in the entire complex. Growing support of global pork demand continues to be the focus in early week buying although fundamental pressure remains evident through the market. With cash hog values slipping further lower, and active triple-digit losses in pork cutout values, the focus on underlying fundamental weakness through the end of the year could weigh on recent futures gains through the week. Extremely active weekend packer schedules this Saturday will try to make up for losses last weekend and try to pull hog numbers ahead during the holidays. This could continue to keep packers running at aggressive speeds, which sometimes leads to additional mechanical issues, resulting in further backlogs of hogs in the system. In the short term, futures trade could maintain and build on Monday's gains, which will be huge in sparking renewed underlying support through the end of the year. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents lower. Tuesday slaughter numbers are expected near 494,000 head. Saturday runs are expected at 378,000 head.

	BULL SIDE		BEAR SIDE
1)	Steady-to-firm price movement over the last week in live cattle futures has helped to regain underlying market momentum as traders expand technical support off recent support levels.	1)	Despite anticipation of what a COVID-19 vaccine will do, the fact that record numbers of COVID cases and daily deaths continue is creating significant implications for beef demand. This could continue to limit product movement and demand as more restrictions are being implemented around the world as well as in the U.S. markets.
2)	Feeder cattle futures continue to gain underlying momentum, although at a slower pace than last week, as prices have quickly moved away from support levels. Spot feeder cattle futures have rallied $3 per cwt in the last week, helping to establish a benchmark price at $140 per cwt.	2)	Significant price pressure in boxed beef values continues to plague the market as wholesale beef values seem to be unable to find support even at lower price levels. This could underpin any technical support in the market through the end of the year.
3)	Active gains quickly flooded the lean hog futures as traders viewed the recent market slide as overdone, helping to quickly build off recent market pressure.	3)	Sharp losses in pork cutout values developed Monday with aggressive triple-digit pressure in belly ($5.53), ham ($3.80), and loin ($3.33) cuts, creating significant weakness in the pork complex.
	Continued active pork movement is expected through the end of the year in both domestic and export markets. The focus on long-term market growth surrounding vaccine rollouts around the world are starting to build hope in traders although short-term demand remains subdued.	4)	The strong and aggressive moves higher in futures trade is not going to be able to continue long-term without underlying support redeveloping in cash hog and wholesale pork values. This may continue to add underlying volatility to the complex.