DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $269.82 -$0.80*

Hogs: Higher Futures: Higher Lean Equiv: $99.89 +$0.35**

*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The index has been updated to depict recent changes in live cattle weights and grading percentages.)

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

GENERAL COMMENTS:

The limit lower trade in cattle futures results in expanded limits today. The fact that some traders could not liquidate long positions due to futures being limit down may increase the desire to sell at the open to exit those positions. Even though the Cattle on Feed report was neutral to bullish, the Tyson plant closing in Nebraska was a bearish development. This, along with the plant in Amarillo, Texas, reducing its capacity, is a bearish development. The market has recently seen uncertainty on top of uncertainty, resulting in live cattle futures falling to the lowest level since late June and feeder cattle to the lowest level since early July. Boxed beef prices were lower on Monday with choice down $0.99 and select down $1.47.

Hog futures found buying interest after the weakness on Friday. It is uncertain what triggered the buying interest, other than an oversold market and the potential for increasing demand through the end of the year. The shorter trading week and the end of the month may have increased the interest in short covering. Packers were a bit more aggressive on Monday, with the cash price average at $74.08, on limited trading activity. They should be more aggressive today to purchase hogs early due to the upcoming Thanksgiving holiday. Pork cutout values increased $0.35.

	BULL SIDE		BEAR SIDE
1)	The supply of cattle remains low, and there is little evidence of the herd rebuilding. In fact, the weakness may result in heifers continuing to move to feedlots.	1)	Cattle futures locked limit down most of the day Monday, which likely will result in follow-through selling as traders liquidate positions.
2)	Cattle futures are oversold, and the end of the month may see some short covering due to the recent sharp decline in futures.	2)	Boxed beef continues to see weakness, which will keep packers on the defensive to protect margins.
3)	Hogs may see stronger cash and higher cutouts as December approaches and demand improves.	3)	Hog futures have yet to find solid support. Higher cash and stronger cutout prices have been short lived.
4)	Hog futures are bound to retrace as the price has declined almost steadily since late September.	4)	Packers have plenty of market-ready hogs available at higher weights, keeping the market supplied with pork.

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. Also, stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.

Robin Schmahl can be reached at rschmahl@agdairy.com

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