DTN Early Word Livestock Comments

Cattle: Steady to Higher Futures: Mixed Live Equiv $137.75 -1.29*

Hogs: Higher Futures: Mixed Lean Equiv $ 84.44 +5.82**

* 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 interest is expected to remain sluggish as both sides return from the long holiday weekend. The ability for feeders to hold out for moderate-to-strong price support the last week of December will continue to spark optimism and higher asking prices. Packers will continue to focus on the need to fuel active procurement levels as plants move out of "holiday schedules" and into the month of January. Cash cattle trade last week posted a $1 to $2 per cwt gain in live cattle with prices hovering at $111 to $112 per cwt, while dressed cattle sold at $175 to $176 per cwt, $3 to $4 higher than Christmas week's average. Asking prices and bids are not expected to be widely seen until Tuesday or Wednesday with potential late week trade likely.

Light-to-moderate support late last week in live cattle and futures trade appears to be in question early Monday morning as traders are faced with significantly higher grain trade during the overnight session and continued lack of support in beef values last week causing concerns that traders will back away from holiday week highs. Although February live cattle futures ended 2020 above $115 per cwt, which was a major accomplishment given the volatility and uncertainty during the year, the inability to break through resistance levels could create additional underlying pressure through the entire cattle market. Traders will closely watch movements in outside markets, especially the gains in corn prices, which could quickly derail further buyer support across the complex Monday morning. Trade volume is expected to return to normal levels during the week with holiday breaks over and traders returning from Christmas and New Year's vacations ready to dive into the new year and all the uncertainty but potential that lays ahead. Late week pressure in boxed beef values last week is not a significant shock given the reduced holiday trade and recent market volatility in the market. Renewed focus will be placed on the direction of beef values through the first couple weeks of January as traders look for additional movement following holiday buying activities, and the potential to bring some needed stability back into the market.

Aggressive end of the year gains in lean hog futures will be a hard act to follow across the lean hog complex Monday morning. February futures closed above $70 per cwt for the first time in two months based on continued support from domestic and export markets. Over the last couple of weeks. The surging grain and feed markets appear to have little negative impact to the lean hog complex compared to the weakness in cattle trade. This may continue to lead to renewed momentum during early January. Packers are expected to focus on returning to more normal processing schedules following the holiday breaks the last two weeks, helping to move additional pork through the system, which was limited by plant issues and holiday schedules. Pork cutout values surged higher late last week with cutout values posting an aggressive gain of $4.93 per cwt. This move was driven by ham and belly cuts gaining over $12 per cwt in each of the respective markets at the end of the year. The continued aggressive movement in pork markets continues to limit the overall supply levels despite aggressive production levels at the end of the year. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents higher. Monday slaughter numbers are expected near 488,000 head.

	BULL SIDE		BEAR SIDE
1)	Strong end of the year gains in cash cattle trade last week is helping to spark renewed optimism by feeders. Although activity is expected to remain sluggish, Monday asking prices, when they develop, are likely to be at $115 or higher live basis, and $180 and higher dressed in the North.	1)	Double-digit gains are seen in overnight grain markets with corn prices posting 10-cent gains, while soybean futures are 33 cents higher. This continued focus on higher feed prices is likely to derail recent buyer support in cattle futures, especially feeder cattle trade.
2)	Live cattle futures continue to trade well above the 40-day and 100-day moving averages, focusing on the continued late year support seen during the last two weeks. This momentum may be able to offset wholesale beef weakness and spark renewed buyer interest in nearby contracts.	2)	Boxed beef values faltered at the end of December, with continued uncertainty in the market as traders move away from end of the year holiday needs and back into a more normal demand schedule through the first quarter of 2021.
3)	Pork cutout values surged aggressively higher late last week with double-digit gains seen in ham and belly cuts as prices held $12 per cwt rallies in each market. The focus on active pork movement leading into 2021 is creating renewed optimism in the complex.	3)	Aggressive gains in lean hog futures are being questioned as traders move into the first session of 2021. The question if limited holiday trade led to the price rally, or widespread changing market direction is seen will be answered in the first couple hours of trade Monday, potentially leading to volatile early trade.
4)	Triple-digit gains in nearby lean hog futures posted aggressive gains late last week. This moved February futures above $70 per cwt for the first time in over six weeks, and indicated further gains based on active pork demand.	4)	With lighter packer runs over the last two weeks, increased market-ready hogs are expected to be waiting to move to packing plants. This is expected to increase average weights in the first couple weeks of January, putting additional pork product in the system during early 2021.

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

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