Monday Morning Livestock Market Update - Uncertainty Surrounds Market

GENERAL COMMENTS:

Holiday trading volume and the announcement of a new strain of COVID could not overcome the bullishness of a large price increase for cash cattle. Rather than packers holding back during the holiday-shortened week, they became more aggressive, needing to purchase cattle for current slaughter as well as some for futures delivery. Weekly export sales were 24% lower than the previous week and down 6% from the four-week average, but traders were more interested in the strength of cash and the prospect for higher cash again this week. The initial anticipation is for higher cash but not to the extent of what was seen last week. Boxed beef prices were mixed Friday with choice up $0.90 and select down $1.19.

Hogs fell apart over the news of a new virus strain and pressure from outside markets. Lower cash and cutouts added to the pressure as buyers remain unaggressive. Price on the National Direct Afternoon report showed a decrease of $0.53. Cutouts were down $1.00. Weekly export sales were down 30% from the previous week and down 43% from the four-week average. Concerns surfaced over the potential for export disruptions if the new virus strain becomes more contagious, affecting demand and shipping. A rebound in many of the outside markets may provide some support to futures Monday.

	BULL SIDE		BEAR SIDE
1)	Cattle futures held in the face of the potential for the new COVID strain to affect export demand and demand from the food service industry.	1)	Lower export sales last week were not supportive and further disruption of exports might surface if the new COVID variant becomes more widespread.
2)	Exceptionally strong cash last week sets the stage for higher cash again this week as feedlots will again look for more.	2)	Packers may be reluctant to bid higher for cattle after their aggressive display last week. Feedlots will ask for more but may not get it.
3)	The sell-off of hog futures might have been more of a reaction rather than a reality. Futures may rebound again Monday.	3)	The sharp break of hog futures Friday may trigger further liquidation Monday as the market follows through with further losses.
4)	Traders may view the sell-off Friday as a buying opportunity for the long term.	4)	Hog weights have increased again, indicating plentiful supply with some backing up in the market. This will leave packers less aggressive this week.