Cattle: Higher Futures: Higher Live Equiv: $144.93 +3.40*
Hogs: Lower Futures: Mixed Lean Equiv: $ 88.87 -2.71**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
The large jump in cattle futures so far this week has been a sight to behold as prices push toward the previous highs from the beginning of October. The gains so far this week seem to be tied to the announcement of a promising COVID-19 vaccine. This positive news permeated numerous markets in anticipation of rising demand. A recent study by the Meat Demand Monitor found that only about one-third of the general population will feel comfortable with indoor restaurant dining even if they have a vaccine. It will take time for demand from the food service industry to bounce back so the excitement may be premature but certainly is promising. High cattle weights may indicate there is a backlog of cattle that will continue to come through the market, which could be limiting. The strong gains of futures since late last week should keep the resolve of feedlots strong as they wait it out for higher cash prices. It is doubtful cash business will be done Wednesday in hopes of higher futures and higher bids.
Hog futures are again struggling after making a nice push higher last week. Pork prices in China fell for the first time in more than a year. The month of October showed pork prices in China down 2.8%. Their pork imports are estimated to be down 6% in 2021 as they continue to rebuild their herd. The bright spot is export growth is expected to increase from other countries, which may offset much of this decline. Futures will need to uncover some buying interest or price might retest the lows of Nov. 2. Pork cutouts are struggling, which may leave packers less willing to be generous with their checkbooks.
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Cattle futures are poised to retest the highs from early October, prompting packers to increase bids this week as boxed beef prices improve.
Futures left a chart gap from Friday to Monday, which will likely be filled at some point before the market can move consistently higher. Futures are overbought and will need to correct.
The market is still reacting to the positive news of a vaccine by the end of the year. There is an increasing potential for stronger demand, which could continue to support higher cash.
More cattle may be coming to the market as higher weights indicate there is a backlog of cattle on feedlots. This may cause packers to be less willing to increase bids.
Even though the China's hog herd is expanding, which would reduce export demand, there are other countries that are increasing purchases of U.S. pork, which may offset that decline.
Pork cutouts are struggling, leaving buyers less willing to aggressively go after hogs. This may keep prices in a sideways range.
The market continues to absorb the large supply of pork available to the market, indicating strong demand. This should provide support keeping prices from falling back much further.
Pork demand through the food service industry may take some time to develop. This may keep the market floundering for a while as it tries to find the supply/demand balance.
Robin Schmahl can be reached at email@example.com
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