DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv $136.76 +1.01

Hogs: Steady Futures: Mixed Lean Equiv $ 88.83 -1.15**

* 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 interest remains sluggish in all areas of cattle country Wednesday morning. Although asking prices are still hard to pin down, cattle appear to be priced around $110 per cwt live basis. With lack of bids early in the week, and potentially delayed until later in the week, it may be sometime Thursday or Friday before active trade develops. Feeders still have not seen any cash market support developing from last week's futures market rally, but the hope that firming boxed beef values on Tuesday will stimulate positive price levels could add momentum to live and dressed cattle trade. Futures trade quickly ran out of gas late Tuesday, backing away from earlier support. This firm pressure in nearby live cattle and feeder cattle trade continues to add further concern to the short-term direction of the market. December live cattle futures continue to remain over $4 per cwt above October lows, but if the market continues to chip away at last week's gains, the concern that further market weakness may continue through late November. Traders are encouraged by the ability to push boxed beef higher during early week trade, but the uncertainty as to how much short-term support will develop in meat values could limit the upward price shifts in beef and futures trade over the next week. Feeder cattle futures started to trickle lower over the last two trading sessions, but strong gains last week has rebuild moderate technical support back into the market, which for now could be enough to maintain buyer momentum once traders move back to the focus on cattle complex and away from election coverage and outside market shifts that have overshadowed the markets over the last several days.

Trade in lean hog futures is desperately trying to find any sense of market support as traders continue to test support levels in nearby contracts, but limited gains in deferred contracts indicate that potential support may be just around the corner. Despite the higher close in all but spot month December contracts Tuesday, the triple-digit loss in pork cutout values continues to add underlying pressure to the complex. Few short-term changes are expected in either fundamental or technical factors, which could leave lean hog futures wandering in a narrow trading range near support levels over the next few days. The focus on potential export sales in Thursday's report will be closely monitored. A positive report could give the lean hog complex the spark it needs to draw limited but active buying back into the complex during early November. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to lower. Slaughter Wednesday is expected at 489,000 head. Saturday runs are expected at 272,000 head.

	BULL SIDE		BEAR SIDE
1)	Further support in boxed beef values Tuesday is stimulating additional fundamental support, with the expectations that firm product movement will continue through the end of the year.	1)	Feeder cattle futures continue to chip away at previous market gains seen last week. The steady pressure Monday and Tuesday may not move back to recent lows, but the inability for continued price gains may quickly box the market into a sideways trading range that could be maintained through much of 2020.
2)	Given the limited negotiated cash trade last week, packers are expected to need to become more aggressive over the next couple of days. Given expected elevated asking prices by feedlots, the potential to shift cash values higher remains strong.	2)	Lack of cash cattle price support by the end of the week is expected to cast significant concern about the ability to regain cash cattle support through the end of the year.
3)	Renewed underlying support is trickling into deferred lean hog futures. This is adding further market momentum as traders view the hog complex as oversold but carefully look for an opportunity to step back into the market.	3)	Pork cutout values posted strong losses Tuesday as concerns surrounding domestic and export pork demand develop, partially based on increased COVID-19 numbers and more active restrictions in many areas in order to combat the virus spread.
4)	Cash hog values have trickled higher during the week, creating limited optimism that packers are becoming more aggressive in sourcing hogs through the month of November.	4)	Spot December lean hog futures have moved below initial support levels of $66 per cwt. This moves the next support target at $62 per cwt set in late September. A move to or near these levels would likely stimulate widespread liquidation in what is already considered an oversold market structure.

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

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