Friday Morning Livestock Market Update - Futures May See Pressure From Outside Commodities

GENERAL COMMENTS:

December live cattle futures gapped open Wednesday and never looked back. Later contracts posted new highs as traders were aggressively buying to either exit short positions or to get on board to initiate positions. Buyers seemed to have received their marching orders from packers to purchase cattle at whatever price it takes. It was unexpected that cash business on the hoof would take place at $5.00 to $6.00 higher with dressed cattle upwards of $10.00 higher. It has been some time since we have seen cattle prices at these levels. Boxed beef prices were higher with choice up $0.47 and select up $0.80. Feeder cattle followed suit with triple-digit gains in all contracts. Strong demand for beef and higher prices are pushing feeder prices higher as demand for animals is improving.

Traders seemed to focus on the minor strength of cash and cutouts in order to push December futures higher. Spreads were unwound and new buying surfaced in the anticipation or hopes that prices may have found a bottom. Cash on the National Direct Afternoon report increased $0.11. Cutouts gained $0.06. Packers might be aggressive over the next few weeks to make sure they have sufficient hogs to kill to fill demand. Deferred contracts settled slightly lower as there was likely some profit taking into the holiday weekend. Saturday slaughter is projected at 360,000 head. Markets will close one hour earlier Friday.

	BULL SIDE		BEAR SIDE
1)	Very strong cash and new contract highs should follow through Friday as optimism exploded Wednesday.	1)	Fears over a new COVID variant in South Africa have hit DOW futures hard overnight. This may spill over into most other commodities Friday, resulting in lower futures. Cattle may not be immune to the pressure.
2)	Packers are trying to purchase some cattle ahead and had to pay up in order to accomplish the task. Feedlots will set their sights higher next week.	2)	Packers purchased some cattle ahead for delivery which may allow them to be a bit less aggressive next week.
3)	Traders seemed to think that packers may be more aggressive over the next few weeks as they purchase hogs to keep slaughter active through the end of the year.	3)	Selling pressure on hogs may spill over from the reaction of the commodity complex due to the fears surrounding another COVID variant.
4)	There were only minor gains in cash and cutouts, but there is a potential the market may have found a bottom. This may provide support for nearby contracts.	4)	Packers may have most of the hogs purchased to finish out the week, leaving cash steady to weaker on any business accomplished Friday.