DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv $135.19 +0.25

Hogs: Lower Futures: Mixed Lean Equiv $ 89.65 -3.77**

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

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

General Comments:

Following sluggish cash cattle activity with trade steady in the South and steady to weak trade in the North is putting more emphasis on the overall direction of the market during early November. It is possible that there could be some early week developments in cash cattle traded in order for packers to get late week deliveries, but more likely packers will go through the week looking for additional trade volume through the middle to end of the week. With the month of November now on the books, packers are likely to have access to additional contracted cattle for November deliveries, which can be used to offset the limited cash market trade seen last week. Showlist distribution and inventory taking is likely to be the main event Monday although feeders are likely to post firm price levels to cattle on showlists as the week continues. Futures trade is expected mixed to moderately higher with traders focusing on building on last week's market support in live cattle and feeder cattle trade. The ability to likely establish a market bottom in nearby and deferred contracts is helping to create additional momentum across the complex.

Lean hog futures continue to remain under pressure with follow-through weakness in pork cutout values and cash prices. The underlying softness in the complex continues to create longer-term concern based on continued production levels through the end of the year. Although moderate export business continued in late October, traders have quickly backed away from the aggressive expectations of lean hog futures support during spring and summer contracts. There is still the expectation that hog numbers will ease but given the lack of aggressive movement in demand over the last couple of weeks, there is uncertainty that this lower production will sustain the significant premiums across the complex. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to $1 lower. Slaughter Monday is expected at 486,000 head.

	BULL SIDE		BEAR SIDE
1)	Last week's rally in feeder cattle futures has broken through short-term resistance levels of $136.47 per cwt in November contracts. This is likely to add additional early week momentum to the complex Monday morning.	1)	Lack of cash cattle market support given the recent rally in futures trade is disappointing, as packers continue to focus on steady-to-lower prices in order to fuel the upcoming fall and winter demand needs.
2)	Packers are going into the week short-bought given the limited activity last week in cash cattle markets. This will likely create additional opportunities for feeders as they increase asking prices on cattle during the week.	2)	The strong market rally in feeder cattle futures is impressive, but the lack of fundamental shifts in the markets over the last week is creating concerns about the sustainability of recent market moves.
3)	Lean hog futures continue to remain oversold, giving the expectation of renewed commercial buyer support moving into the complex during early November.	3)	December lean hog futures tumbled lower Thursday, stopped only by trade limits of $3 per cwt. This will allow for expanded trade limits in all lean hog complex of $4.50 per cwt, causing significant concerns of further end of the week market weakness.
4)	Cash price stability is expected to continue during the near future with packers still aggressively sourcing market-ready hogs in order to maintain current production schedules.	4)	Pork cutout values tumbled lower once again Friday, creating additional concern that recent strong demand support for the pork market is quickly eroding. This could add further widespread pressure as nearby lean hog contracts are heavily influenced by wholesale pork values.

Robin Schmahl can be reached at rschmahl@agdairy.com

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