DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $269.93 +$0.16*

Hogs: Higher Futures: Lower Lean Equiv: $96.32 -$2.93**

*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:

Cattle futures face a headwind as lower cash prices are expected due to early cash sales being lower. The Cattle on Feed report will be released Friday afternoon, next week is a holiday-shortened week, and President Trump signed an order to remove tariffs on Brazilian food products. No cash cattle sales took place Thursday with further activity likely to take place after the release of the Cattle on Feed report. Estimates for the report are for on-feed numbers as of Nov. 1 at 97.7% of a year ago, with a range of estimates from 96.9% to 98.6%. Placements in October were at 91.6% with the range of estimates at 89.5% to 95.5%. Cattle marketed at 92.3% with estimates at 92.0% to 93.1%. It is uncertain whether USDA will include comparisons from the missed October report. President Trump signed an order to remove the 40% tariffs on Brazilian food products, including beef, that were imposed in July. Brazil is a key supplier of beef to the U.S. This will open the door for increased imports, further pressuring beef prices over time. Boxed beef was higher on Thursday, with choice up $0.05 and select up $0.63.

Hog futures were able to defy the bearishness of cash and cutouts again on Thursday. Technical buying provided support as the market is oversold and the weekend and holiday-shortened week is coming. Packers have not been aggressive buyers this week, as they may already have purchased a significant number of hogs ahead of time. Hog weights continue to increase, providing more tonnage from fewer hogs. The National Daily Direct Afternoon Hog report showed cash down $2.74, continuing the negative week. Pork cutouts fell $2.93, pushing values down to $90.21.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report is expected to show continued tight cattle numbers.	1)	The tariffs on Brazilian food, including beef, are being removed retroactively to Nov. 13. This will require the refunding of duties collected since that date.
2)	Short-covering may take place ahead of the weekend with cattle futures holding a discount to the lower expected cash trade.	2)	Lower cash is expected Friday when the cattle trade takes place in the country.
3)	There has been interest in buying hog futures to either cover short positions ahead of the weekend or due to the market being extremely oversold.	3)	The continued weakness in cash hogs and pork cutouts this week may be evident Friday as packers do not seem to need many hogs and demand is less than expected.
4)	Low prices will cure low prices. The demand for pork should improve as consumers stretch their food dollar.	4)	Heavier hogs mean more pork will be available with fewer hogs. Less expensive feed prices may keep this trend intact.

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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