Thursday Morning Livestock Market Update - Trade Positioning Ahead of Reports

GENERAL COMMENTS:

Just when it seemed the table was set as far as cash business was concerned, packers stepped up to the plate to purchase cattle at steady money with last week. Packers could not wait any longer to procure needed cattle and had to meet the offers of feedlots. This may provide greater confidence next week as demand is holding. The concern over potential restrictions on public places due to the surge in COVID has been put to rest and President Biden indicated there would be no shutdowns. This provided confidence for the restaurant industry and should keep beef demand strong. Boxed beef prices increased Wednesday with choice up $0.47 and select up $0.91. USDA will release the Cattle on Feed report this afternoon. The estimate is for cattle on feed to be 99.8% of a year ago, placements at 103.4% and marketings at 104.4%. It will be interesting to see where it lands as the on feed and placement estimates have a wide range of guesses.

Hogs have been impressive over the past two days as cash prices have rallied with packers aggressively looking for hogs. Cash on the National Direct Afternoon report was $0.55 higher. It is unlikely we will see higher cash Thursday, but it certainly looks like much of the gains might be held for the week. Cutouts were a little anchor on the market with price down $0.24. Traders at first Thursday will be assessing weekly export sales in the hopes that international interest remains strong. Then they will trade in anticipation of the numbers on the Hogs and Pigs report due out after the market closes. All hogs are estimated at 97.2% of a year ago. Kept for breeding is estimated at 100.1% with marketings at 97.0%. Friday hog slaughter is estimated at 42,000 head with nothing scheduled for Saturday due to Christmas.

	BULL SIDE		BEAR SIDE
1)	Cash trading back to steady with last week is a victory for feedlots and may set the stage for next week.	1)	Live cattle futures have yet to break out of the downtrend that began a month ago. Packers have been able to obtain the desired supplies without too much difficulty.
2)	A friendly export sales report and Cattle on Feed report could turn the trend higher.	2)	Even though cold storage of beef in November was 4% below a year ago at 493.3 million pounds, inventory grew 4% from October. Supply may continue to build.
3)	Stronger cash this week may indicate packers are seeing stronger demand and tighter supplies early next year.	3)	Belly stocks in cold storage at the end of November showed an increase of 117% from October and were 8% above a year ago.
4)	Futures are poised to retest the highs of a month ago. A breakout above that level would open the way for higher prices as technical traders would increase buying interest.	4)	A bearish Hogs and Pigs report could pull futures down quickly, possibly eliminating the gains of the week.