DTN Early Word Livestock Comments

Cattle: Steady to Higher Futures: Higher Live Equiv $156.16 +1.58

Hogs: Steady Futures: Mixed Lean Equiv $ 83.53 -0.19**

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

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

General Comments:

Cash cattle trade remains quiet heading into Wednesday morning with most of cattle country unable to post reported cash cattle trade. A few sales were reported in Iowa Tuesday afternoon at $172 per cwt, but this is still not enough activity to establish a market trend. The continued surge in futures trade and boxed beef values during the week is helping to create expectations from feeders for higher cash cattle trade by the end of the week, even if they need to restart cash trade negotiations following the Thursday holiday break. As typically seen during a holiday week, the desire by both sides is to wrap up business before the break, but both sides are not beyond waiting until after Thanksgiving if they feel it will advance their respective position. The uncertainty in the market is based partly on unclear amounts of cattle packers "needs" to purchase going into early December. Although the currently active plant speeds will continue to stimulate active cattle movement, the amount of early December contracts being called and late year holiday schedules may limit the amount of short-term buying needed in order to fuel current plant speeds. Futures trade has continued to gain momentum through the week, although prices in live cattle and feeder cattle futures have fallen away from previous highs at closing bell. It is still too early to determine if the market is starting to cool, or traders are regrouping in order to position for further gains before the holiday break. Trade volume is expected to remain light once again. Outside market direction is likely to be a major factor in the overall movement and direction of cattle trade during the pre-holiday session. CME trading hours will remain normal Wednesday with markets closed Thursday and an early close on Friday.

Lean hog futures seem to be struggling to take the next step higher despite widespread gains seen through the rest of livestock trade and outside markets. The Dow Jones Index closed above 30,000 points for the first time in history Tuesday, and crude oil prices have continued to surge higher. The inability to spark widespread follow-through gains in lean hog futures is partially focused on the uncertainty of how much more support can be built in pork demand short term even if the economy rebounds. Concerns about growing production levels and falling pork prices in China has created increased uncertainty about future export sales levels to the country, which would be a significant hit to the entire port industry. The firmness in cattle markets is still a bullish factor for the lean hog market, as increased domestic demand will likely spark further product demand. But hog production is not slowing down significantly, limiting the expectation of tighter supplies in the coming months, no matter how active pork demand becomes. This could keep prices hovering in the current trading range in the near future, and possibly the end of the year. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady 50 cents lower. Slaughter Wednesday is expected at 482,000 head. Saturday runs are expected at 385,000 head.

	BULL SIDE		BEAR SIDE
1)	Underlying optimism in the economy continues to be a major factor in sparking renewed cattle market support. The Dow Jones Index broke through the 30,000-point ceiling Tuesday, creating new highs that is likely to spread to cattle market optimism.	1)	Despite the active gains in futures and beef values, cash cattle trade has been hesitant to shift higher during the week. The lack of firm gains over the next couple of days could limit underlying market optimism in the entire cattle complex.
2)	Boxed beef values continue to show no sign of letting up as aggressive buying support is seen in choice and select markets. The underlying support of higher beef values is signaling widespread optimism across the entire complex.	2)	Limited trade during the week could limit consistent trader interest, allowing for traders to quickly being distracted by other outside markets or news stories. This may lead to late week price shifts.
3)	Outside market support seen during the week continues to be a strong indicator for increased consumer buying. This is expected in pork markets over the coming weeks.	3)	Light trade volume is likely the rest of the week. Although the expectation that current market support may hold, there is potential for wide-ranging price shifts to develop due to the limited traders in the market.
4)	Firm underlying gains on Tuesday in deferred lean hog futures points to a more steady market growth as traders continue to balance demand growth with current supply levels. Summer 2021 contracts are holding $15 per cwt premiums to current price levels, pointing to further market support over the coming months.	4)	Fundamental pressure in cash and pork cutout values during the week has created growing concerns that technical support may be limited following the Thanksgiving holiday. This could cause further market retractions over the coming days and weeks.

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

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