Monday Morning Livestock Market Update - Weak Outside Markets May Pressure

GENERAL COMMENTS:

There is not much to get excited about this week for the cattle complex. It will be a shorter trading week as markets will not be open Friday. Cash trade may take place earlier rather than later as both packers and feedlots may want to accomplish business due to the upcoming holiday. The prospect for cash is not a good one as it is anticipated to decline again. Another development that may have an impact is the surge of the omicron virus and the impact it may have on the economy. Many outside markets are under substantial pressure due to the Netherlands initiating another lockdown with some other countries in the United Kingdom possibly considering similar measures. This should not impact demand, but it could impact production capacity if this becomes more widespread in the U.S. Processing facilities could be impacted due to employees possibly being out due to sickness. Boxed beef was able to increase slightly Friday with choice up $0.04 and select up $0.14.

Hog traders were trying to decide which way the market will go. The feeling is supply will tighten next year, but the next two weeks will see lighter slaughter levels and likely lower cash as packers will be purchasing less while producers will want to move market-ready hogs. However, the performance of cash last week was impressive with the market possibly showing something similar this week. The pressure on the financial and other markets overnight due to the surge of the omicron virus and potential tighter restrictions, may put pressure on the market. The National Direct Afternoon report on Friday showed cash down $0.68. Cutouts plummeted $5.67.

	BULL SIDE		BEAR SIDE
1)	Beef demand is not expected to be impacted much even though there is a surge of COVID in the country and the world.	1)	Cattle futures may feel spillover pressure from the weakness of financial and other outside markets.
2)	Cumulative beef export sales this year total 1.064 million metric tons (mmt) compared to 920,000 metric tons (mt) last year.	2)	The upcoming holiday period will reduce slaughter, leaving sufficient cattle available. Packers already having contracted supplies ahead of time may result in lower bids.
3)	Packers may step up a bit more aggressively early this week to make sure they obtain hog supply due to the shorter week.	3)	The decline of cash and the sharp decline of cutouts on Friday may put pressure on hog futures Monday.
4)	Hog supplies are anticipated to decrease in the new year as heavy front-end supplies might finally be cleaned up.	4)	Packers may not want or need to purchase aggressively due to the holidays as they have quite a bit of their needs covered for the next two weeks.