General Comments:
Cash cattle interest is likely to be extremely limited early Tuesday morning, but packer interest is expected to improve significantly as the day continues. At this point, asking prices and bids remain undeveloped, but due Christmas on Friday, and Thursday Christmas Eve, both sides appear to want to finish business by late Wednesday, or Thursday morning at the latest. It is uncertain just how many cattle will sell during the week, which could leave this week's cash market trade a quick and speedy endeavor. Feeders are looking for positive market movement given the redevelopment of boxed beef values and firming tone in futures prices. But limited plant speeds over the next two weeks could keep packers hesitant to increase spending during Christmas week. Asking prices are likely to develop at $110 to $112 live basis, and $170 and higher dressed. Initial bids seen sometime late morning or early afternoon would not be unexpected.
Firm gains in boxed beef values seen Monday is creating renewed underlying support through the entire cattle complex, although limited product movement and trade volume is likely to limit significant directional shifts ahead of the holidays. But the ability to bring buyers back into the market over the next two weeks, and move choice and select cuts away from recent lows could spark renewed underlying interest through the entire cattle complex.
Futures trade is expected mixed in limited trade activity with traders focusing on the late-day rally in feeder cattle futures as the platform to stimulate follow-through price movement Tuesday morning. Although the underlying tone of the market remains firm heading into the holidays, the limited trade volume and lack of significant changes in cattle supplies in the near future is likely to open the door for light to moderate positioning in live cattle and feeder cattle markets. This could allow nearby price levels to bounce higher and lower through the morning.
Lean hog futures are expected to remain mixed to mostly higher as traders continue to focus on early-week gains and the potential that increased buyer activity may help to sustain recent market shifts higher in nearby and deferred lean hog futures trade. With April contracts moving to $70 per cwt Monday, a portion of trade will continue to look for renewed market support, defending these recent highs, but the limited activity could allow for light to moderate position taking to develop through the morning.
Traders will continue to be focused on the upcoming reports which will highlight the holiday week and may create additional volatility to the market, which in a normal week, might not gain as much attention. Tuesday's release of the Monthly Cold Storage reports will lead off the list of released reports, followed by the quarterly hogs and pigs report on Wednesday. With government offices closed Thursday due to Christmas Eve, weekly export sales report are also slotted for Wednesday morning instead of the normal Thursday release. The sluggish market moves seen Monday may continue to be the pattern of market movement seen over the next couple of days with limited fundamental or technical market direction expected before the end of the week.
Pork cutout values have gained moderate early-week support, which is expected to help stimulate further buyer activity later in the week, but for the most part, any significant wholesale buying needed before the end of the year has already cleared the market. This could limit overall trade activity and subdue the volume of pork reported on the cutout report not only Tuesday, but through the rest of the week.
Cash hog bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents higher. Tuesday slaughter numbers are expected near 485,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Boxed beef values bounced higher Monday, sparking expectations that further underlying support will develop not only during Christmas week, but set a higher trend of firming beef values into the New Year. |
1) | A short trading week could limit the amount of time and energy feedlot managers and packers have to negotiate cash cattle business. The quick turnaround through the week could leave money on the table that feeders would otherwise be able to take advantage of. |
| 2) | Active gains in feeder cattle futures Monday has helped to spark renewed underlying support through the entire cattle complex. The ability to sustain moderate commercial buyer support through midweek is likely to add to current price support. |
2) | Increased volatility during holiday weeks is not uncommon due to the light trade activity. This has the potential to spark unexpected and unexplained wide market losses due solely based on limited market participation. |
| 3) | Pork prices have bounced higher, creating expectations that further market support may continue to develop through the end of the year. |
3) | The combination of holiday-shortened packer schedules, and Tyson's Columbus Junction plant being down much of last week and early this week could continue to limit cash hog spending needed to gain access to enough hogs through the end of the year. |
| 4) | Hog inventory levels are expected to see light to moderate reductions in Wednesday's quarterly hogs and pigs report. The trend of reducing hog supplies seen over the past two quarters is expected to continue, focusing on tighter supply levels during the second half of 2021. |
4) | Narrow price moves seen Monday in nearby lean hog futures still leaves recent price support fragile going into the holiday and end of the year. This could allow for a moderate price correction with any hint of fundamental market weakness over the next two weeks. |
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