DTN Early Word Livestock Comments

Cattle: Steady to Higher Futures: Mixed Live Equiv $150.90 +2.96

Hogs: Steady Futures: Mixed Lean Equiv $ 84.49 -2.55**

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

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

General Comments:

A few cattle sold in the South Tuesday afternoon with prices fully steady with last week at $110 per cwt. It is uncertain just how aggressive packers will be in order to secure cattle midweek, given steady price levels and limited holiday production next week. But with the help of moderate-to-firm buying moving into nearby futures trade once again, feedlot managers are pointing to cash prices remain steady at worst for the week and are willing to hold out until Thursday or Friday if bids are not to their liking. There still is a lot of cash cattle trade yet to do, with the focus on the late week direction in futures trade as well as Friday's Cattle on Feed report. But with cattle weights starting to retract from recent highs, the availability of beef is expected to become much less burdensome on the market through the end of the year. Futures trade is expected to remain mostly higher as follow-through buyer support is likely to develop in the lightly traded market Wednesday morning. The potential for additional firm market gains as traders back away from last week's losses will keep prices stuck in a wide sideways trading range through most of the week. Traders are also likely to look ahead to Friday's Cattle on Feed report over the next couple of days. Cattle on feed numbers are estimated to increase 1.8% above year-ago levels, although expectations of lighter placement numbers in October could spark underlying support. October placements are estimated at 90.8%, which would be the first time since May when year over year placements fell to 90%. Even with a lower percentage of placements, placements in October 2019 were the largest of the year, which skews the overall levels when just focusing on percent change from the previous year.

Lean hog futures led the complex higher Tuesday, helping establish renewed longer-term buyer support across the complex. The lack of support in wholesale pork prices could create moderate price uncertainty as traders move back into the complex Wednesday. Limited early trade is expected in most nearby and deferred futures trade, although the aggressive triple-digit gains on Tuesday will be hard for traders not to step back into the market as the complex remains oversold. The underlying support through the entire lean hog market is focusing on the ability for increased export demand to develop through the end of the year. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady 50 cents lower. Slaughter Wednesday is expected at 493,000 head. Saturday runs are expected at 286,000 head.

	BULL SIDE		BEAR SIDE
1)	Sharp gains in choice beef values sparked renewed support in the complex, likely to create additional fundamental support through the last half of the week.	1)	Concerns of beef demand growth through the food service industry in the coming weeks and months continues to be a concern as increased restrictions are being put into place due to rising COVID-19 numbers.
2)	Steady cash cattle trade in parts of Texas and Kansas Tuesday is creating further optimism that additional cash market support will develop as the week continues.	2)	Holiday-reduced packer schedules next week may limit the need for most packers to remain aggressive when entering the cash cattle market this week. This could leave limited numbers of cattle sold, carried over until December.
3)	Triple-digit gains developed in most lean hog futures trade Tuesday. This is creating expectations that further support will develop in the week, moving prices off recent support levels and drawing increased buyer support back into the complex.	3)	Sharp losses in pork cutout values was led by a $7.92 per cwt loss in belly cuts Tuesday. This underlying pressure is creating widespread volatility in wholesale pork values and adding uncertainty to the entire market.
4)	Packer plant speeds continue to aggressively work through market-ready hogs, with the expectation that these procurement levels will continue through the end of the year.	4)	Despite the recent rally in futures prices, lean hog markets remain near support levels and extremely vulnerable to further market liquidation through the end of the month.

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

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