DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $269.77 -$0.62*

Hogs: Higher Futures: Higher Lean Equiv: $99.25 -$2.25**

*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:

It was surprising to see trade develop in cash cattle on Wednesday. Cash cattle traded $6.00 lower in the North and $4.00 lower in the South. Generally, when there is a Cattle on Feed report, cash trade does not develop until Friday. Feedlots seem anxious to move cattle early, as cattle continue to get heavier with little benefit due to declining prices. Heavy cattle will be the norm as feed prices are low, but when feeding to heavier weights provides no benefit, the cattle need to be sold. Boxed beef declined with choice down $0.72 and select down $1.40. The average estimates for Friday's Cattle on Feed report are for on-feed numbers as of Nov. 1 at 97.7% of a year ago. Placements in October at 91.6% with cattle marketed at 92.3%. It is uncertain whether USDA will include comparisons from the missed October report.

The rebound in hogs seemed to be purely technical. It seems short-covering took place due to the oversold market conditions and ahead of the weekend and the upcoming holiday week. There is no indication prices have found support. Neither cash nor cutouts were supportive. The National Direct Afternoon Hog report showed cash down $0.95, but still with light trading activity. Packers will need to step up to purchase and may be more aggressive Thursday. Pork cutouts fell $2.25, with values down to $93.12. The weekly hog weights averaged 292.5 pounds, an increase from the previous week.

	BULL SIDE		BEAR SIDE
1)	Low placements of cattle are expected in October, which indicates the market should remain supported.	1)	Cattle marketings are estimated to be 7.7% below a year ago. There are fewer cattle, but feedlots are holding them longer.
2)	Limited rebuilding of the cattle herd is taking place. This will prolong the tightness of cattle supplies.	2)	Cattle weights continue to increase, with the inventory of cattle on feed 150 days or more estimated to be nearly 20.0% above a year ago.
3)	Traders may want to cover their short positions ahead of the weekend due to the market being oversold.	3)	Weekly hog weights continue to increase. The average weights for the week ending Nove. 15 with 292.5 pounds, up 0.6 pounds from the previous week and 5.1 pounds higher than a year ago.
4)	Packers may be more aggressive in the cash market Thursday as they need to purchase quite a few hogs to round out their needs for the week.	4)	The fundamentals in the hog market remain bearish. The market is struggling to find support.

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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