DTN Early Word Livestock Comments

Cattle: Mixed Futures: Higher Live Equiv $137.11 +1.36

Hogs: Steady Futures: Mixed Lean Equiv $ 79.23 -1.64**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

General Comments:

Cattle traders who held out until Thursday were rewarded with reported Southern trade Thursday afternoon at $108 per cwt. This is generally steady with last week's price levels despite the early week discounted cash sales reported in the North. Northern cash cattle trade on a live basis was reported from $105 early in the day to $108 per cwt as the afternoon developed. The $108 per cwt would be generally $2 per cwt higher than Nebraska's average last week. With some additional cattle still needing to be traded, the focus on beef market firmness over the next few days could help to establish a seasonal low in the cash cattle market near the short term. The fact that market interest and packer processing speeds will be limited the next two weeks also creates a wrinkle in plans to move prices higher through the end of the year. But the ability to end this week with steady-to-higher cash cattle trade following moderate-to-strong pressure early in the week, may create renewed optimism through the market. Cash and futures traders are anticipating the afternoon release of the Cattle on Feed report at 2 p.m. Total on feed numbers are expected to be steady with last year's levels, but placements seem to be the focus of most market adjustments, with analysts estimating a 9% drop from year-ago levels. This would put the previous placements in perspective and likely stimulate renewed interest as traders look for supply tightness through the middle of 2021. Early futures trade is expected to create additional market firmness following the break-through, short-term resistance levels Thursday. If price levels can stay above $114 per cwt in spot February contracts through the end of the week that will be huge in stimulating additional buyer interest. Although trade volume is expected to remain subdued next week due to the upcoming Christmas holiday, keeping prices in these higher trade ranges will go a long way in maintaining buyer interest no matter the volume level.

Lean hog futures continue to tread water through the end of the week with continued pressure growing in pork cutout values and limited packer processing speeds, creating concerns about the market remaining current through the holidays. Although an aggressive run of processing is expected Saturday, mechanical and weather delays over the last week in numerous plants around the country have added up to significant losses in hogs being processed. This is not expected to have a direct or significant impact to pork supplies in either domestic or export markets based on previous production, but it could quickly create a backlog of market-ready hogs needing to move through the system over the next couple of weeks. With Christmas and New Year's falling on Friday, plant runs will likely be significantly impacted both Thursday and Saturday next week, further limiting pork throughput in the system. That being said, lean hog futures remain well rooted within the current, but wide sideways trend. This support is likely to limit aggressive market pressure as traders continue to focus on growing demand and the potential to tighten supplies during the first half of 2021, while pork demand is projected to remain strong. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents higher. Friday slaughter numbers are expected near 478,000 head. Saturday runs are expected at 376,000 head.

	BULL SIDE		BEAR SIDE
1)	Despite early week pressure, late week development in cash cattle trade is focused on steady to higher cash cattle trade. If Southern cattle feeders can hold out for steady money, it will open the door for further gains Friday.	1)	Even if cattle on feed numbers remain near steady with year-ago levels, this would still point to significant numbers of cattle in the system, and potentially the largest number in over 10 years. This could curb short-term gains in futures trade.
2)	Live cattle futures have moved through short-term highs, with February futures breaking through the $114 per cwt level, at $114.45 per cwt before opening bell. A move above $114.50 during early trade opens the door to test November highs of $115.10.	2)	Boxed beef prices moved higher Thursday for the first time in several weeks, but the focus on seasonal pressure in beef values remains. This may limit upside movement in choice and select cuts over the next couple of weeks, limiting market momentum before early January.
3)	Firm underlying support in deferred lean hog futures is putting the focus on potential market gains in early 2021. The ability to create further price support at the end of the week may spark renewed commercial interest at the end of the year.	3)	Pork cutout values shifted lower, creating growing uncertainty if pork cuts will be able to stabilize through the holiday seasons.
	Active pork exports reported Thursday morning continue to focus aggressively moving pork in order to meet world needs. This is expected to sustain market support as global pork appetites are expected to remain strong well into 2021.	4)	The investigation and firing of seven previous managers at Tyson's Waterloo pork plant over "COVID-related betting" puts a black eye on Tyson and the entire pork industry.

Rick Kment can be reached at rick.kment@dtn.com

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