Monday Morning Livestock Market Update - Exuberance of Cattle Traders May Be Tempered

GENERAL COMMENTS:

Light cash cattle trade developed late on Friday as packers needed to pay up to purchase what was necessary to maintain slaughter. Cash cattle were reported at $4.00 higher in Nebraska. There were some reports of packers purchasing cattle on Saturday at $1.00 to $2.00 higher in the South. It will be an interesting week as packers have not purchased many over the past two weeks. Feedlots will hold with the intent to obtain higher prices, anticipating that packers will need cattle. Live cattle broke out of its sideways trading range, while feeder cattle easily pushed higher to close the next chart gaps that had remained above the market. This sets a bullish tone for the year. Boxed beef prices supported the move, with choice up $2.52 and select up $4.54.

Hog futures diverged with weakness in the nearby contracts as the weakness of cash is limiting the upside price potential. Traders are concerned that more hogs will be available to the market in early 2026, with demand possibly unable to absorb the increased pork supply. However, as the market returns to normal after the holiday season, a clearer picture of supply and demand will be seen. On Friday, the National Daily Direct Afternoon Hog report showed cash down $0.19 with very few hogs traded. Pork cutouts gained $0.83. Retail orders may be evident early in the week as they stock up after the holidays.

	BULL SIDE		BEAR SIDE
1)	The surge in cattle futures renewed the bullishness in the market and may provide confidence to traders for higher prices.	1)	The surge in cattle futures on Friday may have been excessive and was fueled by lighter trade volume.
2)	Feedlots will hold for higher cash as packers have not purchased many cattle over the past two weeks. They may need to step up aggressively.	2)	Feedlots have been holding cattle over the past two weeks and may need to move them rather than feed them for another few weeks. They may be willing to sell at a steady cash price.
3)	Pork cutouts may see strength as retail outlets restock pork after the holidays. Pork movement may have been better than expected.	3)	The supply of hogs that are ready for the market may be large, keeping cash prices under pressure in the near term.
4)	Later hog futures continue to make new contract highs as optimism remains over pork prices during the second half of the year.	4)	Nearby hog contracts fell below the uptrend line on Friday, which may open the door for further liquidation of futures contracts.