Tuesday Morning Livestock Market Update - Mixed Trading Activity Might Continue in Complex

GENERAL COMMENTS:

Cattle futures closed in the red across the board Monday as traders again want to see proof of higher cash before jumping on the long side. Showlists are higher in Kansas and Texas, which could be expected due to limited cash activity last week. There were no bids or offers posted as usual early in the week as neither side wants to tip their hand early. One would think packers might be more aggressive this week based on lighter cash activity last week, but they remain uncertain of demand. Product movement over the holidays is being assessed and supply replenished as needed. Boxed beef was moderately higher with choice up $0.77 and select up $0.67.

Hog futures were mixed with some optimism showing in deferred contracts. However, uncertainty clouds the immediate future. Prop 12 was initiated this week and it is unclear the impact that will have. There will be a weekly specialty report from the USDA that will provide information on pork prices in California, but those prices may not really mean much to the overall market which runs on supply and demand. Higher cash was impressive yesterday posting a gain of $0.22 on the National Direct Afternoon report. However, cutouts fell $5.33. February pork cutout futures only declined $0.22 as the market tries to look past the daily fluctuations.

	BULL SIDE		BEAR SIDE
1)	Cash is expected to trade higher again this week, which should provide support to the market.	1)	Packers have been able to purchase some cattle for differed delivery, which reduces their need to be aggressive in the cash market.
2)	Boxed beef has been trending higher providing indication of continued strong demand.	2)	The impact of the surge of COVID-19 on the workforce for slaughter facilities and trucking as well as the food service industry, might have a negative impact.
3)	Hog futures are holding well despite the uncertainty in the market over the impact of Prop 12.	3)	Uncertainty surrounding Prop 12 may keep traders focusing only on short-term trading or day trading to take a quick profit out of the market if they can.
4)	Strong movement of cutouts indicates strong demand even after the holidays. Demand may continue strong somewhat contra-seasonally this year.	4)	Pork demand should slow seasonally, which could back up hogs in the market resulting in lower cash and cutouts.