Friday Morning Livestock Market Update - Limited Volatility Expected

GENERAL COMMENTS:

Trading might exhibit a similar pattern as Thursday for cattle as cash business is mainly finished for the week. Traders are looking at a three-day weekend that might influence trading activity Friday. There is a large winter storm blanketing a large portion of the nation and will impact the movement of livestock and livestock performance. With some cattle already backing up in the country, this adds more frustration as increased feeding may not provide any benefit. We are not even through the end of this week, but the potential for higher cash next week has already dimmed due to packers contracting for deferred delivery. Weekly export sales were much better than the previous week at 9,700 mt. Choice cutouts increased $2.93 with select up $1.78.

The hog market showed a number of interesting things going on Thursday. First of all, cash was $0.26 higher on the National Direct Afternoon report and a bit of a surprise. The other surprise was the large increase of cutouts. This is the largest gain seen in one day on reports going back to 2010. It seems that slower processing speeds are tightening available supply to retail. This is pushing prices higher as consumer demand remains strong. Store shelves are trying to be restocked but available product is tighter. Now, there is a major winter storm to contend with as well over the next few days. Weekly export sales were good at 19,800 metric tons. Saturday slaughter has been a moving target this week with the updated projection revised lower to 156,000 head.

	BULL SIDE		BEAR SIDE
1)	There may be some short covering moving into the three-day weekend as futures seem to be stabilizing.	1)	Heavier cattle weights and slower processing is backing up supply and does not bode well for cash. Less cattle need to be purchased.
2)	Chart gaps remain above the market that will be filled at some point. Boxed beef continues to increase on a daily basis, which should provide some support.	2)	Feedlots want move cattle rather than hold on to them. The cost of feeding them is not being recovered due to steady to lower cash. Packers have plenty to choose from.
3)	Strong pork cutout values indicate there is strong demand. Packers will need do what they can to meet that demand which may mean higher cash prices.	3)	Demand is good but packers are having a difficult time processing the hogs due to the impact of COVID-19. Lower processing schedules leaves them with less need to purchase hogs.
4)	Hogs have remained relatively current despite slower processing speeds.	4)	Hog futures remain choppy searching for long-term direction. It may take longer for numbers to tighten due to reduced slaughter.