DTN Early Word Livestock Comments

Cattle: Steady to Higher Futures: Mixed Live Equiv $142.81 +0.61

Hogs: Higher Futures: Mixed Lean Equiv $100.51 +2.85**

* 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 undeveloped Tuesday morning with packers and feeders still assessing the weekly market. Bids and asking prices are still very fluid and may not to develop until midweek or later. Given the cash market success, feeders will start out with higher asking prices, but just how much higher will be the main question over the next couple of days. Overall showlists remain generally smaller, indicating potential tightness starting to develop over the next few weeks. The expectation has been that the supply of market-ready cattle should start to tighten during the middle of October, which could spark some additional underlying support in the coming weeks. But given that packers have been aggressively buying in the negotiated market the last few weeks, and overall cattle weights have only fallen slightly from recent highs, could limit any short-term concerns that packers will be short of cattle to process anytime soon. This could leave packers limiting spending and curbing short-term cash market support. Futures trade posted a small technical market bounce, moving away from initial support levels of $111 per cwt in spot December contracts. The ability to hold above these levels over the next few days may spark renewed commercial involvement, driving additional open interest back into the complex during the next couple of weeks. Feeder cattle futures continue to maintain support levels near $140 per cwt in November contracts. The inability to trade above these levels over the next few days is opening up the possibility for additional seasonal pressure to develop through feeder cattle trade, especially given the recent gains in grain markets.

Narrow gains on Monday in lean hog futures is helping to rekindle buyer support in the lean hog complex. Strong gains in pork cutout values and renewed support in cash hog values is adding limited support to the futures market, but given the volatile and wide price swings in pork cutout values the last couple of weeks, traders are putting less confidence in a one day move higher in meat or cash hog price levels. Given the continued expectation that export demand for pork will improve due to continued African swine fever problems developing in Germany, nearby contracts remain in the top end of the trading range. But spot December lean hog futures have continued to bounce around within a $5 per cwt sideways trading range, which appears to still contain the market over the near future. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Tuesday is expected at 486,000 head. Saturday runs are expected to test 270,000 head levels.

	BULL SIDE		BEAR SIDE
1)	December live cattle futures have once again moved above the 40-day moving average, helping to spark additional commercial buyer support back into the complex.	1)	Feeder cattle futures continue to hover at or near support levels of $140 per cwt. The inability to move prices above these levels during early October could signal further short-term pressure in the coming weeks.
2)	Renewed gains in beef cutout values during early-week trade is focusing on the potential for firming demand support as the industry focused on tighter supplies over the coming weeks.	2)	Despite the expectation that market-ready cattle supplies should tighten over the next few weeks, the inability to significantly lower slaughter weights is creating concerns that there are more cattle than expected still needing to be processed. This could limit upward support in cash values over the coming weeks.
3)	Sharp triple-digit gains in pork cutout values Monday is expected to carry into Tuesday's futures trade with the focus on further short-term gains developing over the next few trading sessions.	3)	Pork values have moved higher and lower within a wide and unpredictable range. The lack of consistent price direction is adding even more concern and uncertainty to the entire hog complex.
4)	Lean hog traders remain focused on long-term price support through 2021, with summer contracts holding premiums of nearly $20 per cwt to spot December futures as traders focus on continued demand growth and retractions in the hog herd over the next year.	4)	Nearby lean hog futures remain stuck in a sideways trading range, with traders unwilling or unable to break through resistance levels. The inability to test technical support of $70 per cwt in December futures could quickly limit open interest in the market during fourth quarter trade.

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

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