DTN Early Word Livestock Comments

Cattle: Steady to Higher Futures: Mixed Live Equiv $146.78 +0.11

Hogs: Steady Futures: Mixed Lean Equiv $ 86.03 -2.94**

* 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 markets are expected to remain quiet early Monday morning. Last week's trade posted moderate-to-strong gains with trade seen late in the week with prices at $170 to $174 dressed, mostly $172 per cwt. This is generally $7 per cwt above the previous week. Southern live trade developed at mostly $110 ($108 to $112), which is $3 per cwt higher than the previous week. The sharp pressure in futures trade Friday could limit expectations slightly heading into the week, but the focus on showlist distribution and inventory taking is likely to be the main agenda Monday as cattle are unlikely to be priced. Remember that packers will be looking for lighter runs next week due to Thanksgiving, keeping plants dark on Thursday. This may limit the previous cash market momentum over the next couple of weeks. Futures trade is likely to see moderate price shifts early Monday, although the potential for initial opening trade to hold limited interest given the volatility seen last week could create increased market uncertainty through the entire complex. The triple digit-losses Friday in live cattle and feeder cattle trade quickly took the emphasis away from testing resistance in live cattle futures near $113 (December) and $115 per cwt (February) following the previous gains and brought about questions of where initial support prices may develop if continued pressure is seen mid-November. Growing COVID-19 cases may be starting to play a larger role in the direction of livestock trade, as the questions of labor issues at plants continue to be a major concern going forward as cases increase in nearly all areas.

Sharp losses Friday in nearby and deferred lean hog futures trade has quickly changed the narrative from potential underlying support across the complex and back to nearby contracts testing long term support levels. With December and February futures unable to hold price levels above $65 per cwt late in the day Friday, the concern of further market erosion and widespread liquidation through nearby contracts based on current hog supplies and lack of follow-through demand support. Triple-digit losses in pork cutout values late last week added increased uncertainty to the market, which seems unwilling to find additional market support in any area as November continues and traders move into the holiday season. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady 50 cents lower. Slaughter Monday is expected at 488,000 head.

	BULL SIDE		BEAR SIDE
1)	Sharp gains in cash cattle trade last week will continue to create momentum of feedlot managers as they increase prices of market-ready cattle in order to take advantage of need for packers to gain access to additional cattle through the end of the month.	1)	Choice boxed beef values closed lower for the first time in two weeks Friday afternoon. This may indicate the aggressive surge higher in beef values may be quickly ending, leading to concerns of further pressure in futures trade.
2)	Boxed beef values surged higher last week with choice and select cuts posting double-digit gains ($11.96 and $10.90 per cwt respectively). This underlying support in beef values is still expected to create underlying momentum to cash and futures trade in the near future.	2)	Spot feeder cattle futures have posted aggressive losses last week, falling over $4 per cwt during the one-week time period. This may have established seasonal highs, unless significant buyer support quickly develops across the complex.
3)	Despite the aggressive late week pressure, nearby lean hog futures still remain above the 40-day moving average. This continues to add underlying support through the complex as traders look at moderate-to-active buyer support possible over the near future.	3)	Lean hog futures remain under pressure with nearby contracts close below $65 per cwt once again Friday added concerns that aggressive follow-through liquidation may develop over the next couple of days.
4)	Deferred lean hog futures continue to hold strong premiums to nearby contracts with the focus still on active price support developing through summer 2021 contracts. This support has remained consistent despite the market volatility in nearby futures.	4)	Wholesale pork values tumbled lower Friday, carcass values losing nearly $3 per cwt. This aggressive shift lower in pork prices is likely to add increased pressure to futures prices.

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

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