Tuesday Morning Livestock Market Update - Lethargic Trading Activity Expected

GENERAL COMMENTS:

Cattle were under pressure with feeder cattle leading the complex lower. Cash cattle are expected to trade lower for the week, succumbing to the pressures of the holiday period and generally slowing demand. Boxed beef prices were mixed with choice down $0.63 and select up $2.39. However, cutouts have been declining, setting the negative market tone. Live cattle futures are in a solid downtrend with prices near a level of support. However, that support may not hold due to the current weakness of cash. The Cattle on Feed report is looming with a release on Thursday after the markets close for the extended Christmas weekend. Traders may flatten their positions before the report and the ever-changing COVID virus news. The Commitment of Traders report showed funds as net buyers of 2,404 futures contracts, bringing their net-long positions to 82,254 contracts.

Hog futures were under pressure due to weaker cash, the upcoming Hogs and Pigs report and the uncertainty of pork movement once Prop 12 kicks in at the new year. The National Direct Afternoon report showed a decline of $1.05. Cutouts were able to close higher with a gain of $0.67. The largest uncertainty hanging over the market now is what will happen once Jan. 1 arrives, and California will not be able to have access to pork raised that does not meet the standards for production on farms. California purchases a lot of pork and there is only a small percentage that may meet the new standards. This could leave much more pork available to other states. The Hogs and Pigs report will be released Thursday, providing something else for the market to ponder over the longer weekend. The Commitment of Traders report showed funds were net buyers of 1,288 contracts, bringing their total net-long positions to 48,492 contracts.

	BULL SIDE		BEAR SIDE
1)	The outside financial and other commodity markets are higher overnight, which should relieve some of the pressure evident Monday.	1)	Cash cattle are expected to trade lower again this week with expectations of $1 to $2 losses.
2)	Futures should begin to stabilize, moving toward the Cattle on Feed report and the extended weekend.	2)	The upcoming Cattle on Feed report and the extended holiday weekend may leave traders somewhat lethargic as they flatten positions.
3)	The potential for tighter supply of hogs next year may offset some of the negative implications of Prop 12 beginning in the new year.	3)	Prop 12 will kick in Jan. 1 and it is uncertain what steps packers have already taken or will be taking to deal with the new law and product movement to California.
4)	Futures continue to hold in a sideways pattern where they may remain, moving into the Hogs and Pigs report as well as the extended Christmas weekend.	4)	The upcoming Hogs and Pigs report may keep trading subdued with traders unwilling to take long-term positions.