Tuesday Morning Livestock Market Update - Markets to Open With Uncertainty

GENERAL COMMENTS:

The mixed trading activity Friday was not a surprise as lighter trading activity at the close of the year dominated the market. The December contract made a large adjustment as it ended trading and was impacted by the strength of cash. Cash cattle in the South traded $1 higher with Northern dressed sales $2 to $3 higher. The positive end to 2023 may provide feedlots more confidence of higher prices this week. Packers will need to purchase cattle to get back on track with regular business again, which may leave them more aggressive this week. Boxed beef was mixed with choice down $1.57 and select up $1.09. This does not provide any solid direction. However, the cash strength last week may provide support to the market. Weekly export sales were a dismal 2,100 metric tons (mt), down 78% from the previous week. The Commitments of Traders report showed funds trimming their long positions by 165 contracts, bringing their net-long futures positions to 16,872 contracts. Feeder cattle showed funds selling 834 contracts, bringing their net-short position to 3,092 contracts.

Hog futures closed the week mixed in lackluster trade. However, cash did not perform very well with the National Daily Direct Afternoon Hog report showing a drop of $2.79, bringing the weighted average down to $43.57. The bearishness of cash was offset to some extent by cutouts posting a gain of $2.15. Weekly export sales at 23,800 mt were down 23% from the previous week. This gave traders much to think about over the weekend, but it may not result in any solid price direction to begin the new year. With a strong Saturday slaughter pace, packers will not need to be very aggressive Tuesday. The Commitments of Traders report showed funds as active buyers of 2,348 futures contracts, reducing their net-short positions to 5,890 contracts.

	BULL SIDE		BEAR SIDE
1)	Higher cash cattle trade last week will provide confidence for feedlots to hold for higher cash again this week.	1)	Very low export sales do not bode well for international demand and the movement of beef. This leaves more beef available to the domestic market.
2)	February is now the lead live cattle contract with a discount of over $5.00 below the price December went off the board. Price may need to move higher based on cash.	2)	Variable boxed beef prices do not indicate consistent demand. This may limit cash potential.