DTN Early Word Livestock Comments
Livestock Traders May Exercise Caution on the Open
Cattle: Lower Futures: Mixed Live Equiv: $267.01 -$1.71*
Hogs: Lower Futures: Mixed Lean Equiv: $100.36 $0.00**
*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.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
Cattle futures had a positive close to a holiday-shortened week. The rebound was technical in nature and in reaction to a statement made earlier in the week by Secretary of Agriculture Brooke Rollins. Southern cash cattle traded as much as $4.00 lower for the week after some late business was accomplished in Kansas at less of a loss than earlier in the week. Northern dressed cattle maintained a sharp loss of as much as $13.00 lower. Boxed beef prices were lower with choice down $1.46 and select down $4.46. Continued weakness in boxed beef is expected to unfold, which would have an impact on the upside potential for cattle prices. The exuberance of the statement from the Secretary of Agriculture may run its course, as the statement that there would be a staged reopening of the Mexican border for imports of cattle whenever it reopens is logical and in line with the previous time it was reopened. Traders likely have digested the statement and will turn their focus back to the fundamentals.
Hog futures had a positive week but were unable to follow through with continued buying interest and further fundamental support. Cash was lower on the National Daily Direct Afternoon Hog report with a decline of $1.48 on light activity. Pork cutouts slipped $0.03, but the increase in the offal value drop credit kept the daily equivalent price unchanged from Wednesday. The February and April contracts did close above the sharp downtrend line drawn off the September high, but later contracts have not been able to break above the trendline. Technical traders may have difficulty supporting the market without the fundamentals following suit.
| BULL SIDE | BEAR SIDE | ||
| 1) | Packers in Kansas had to increase bids to obtain the cattle they needed on Friday, and reducing the losses may provide confidence for feedlots to hold this week. | 1) | The strength in cattle futures may be short-lived as traders digest the statement by the Secretary of Agriculture and end-of-the-month short covering. |
| 2) | There is a chart gap above the market that may be filled if packers need to be more aggressive this month. | 2) | Boxed beef prices continue to show weakness, which will have an impact on what packers will pay for cattle. |
| 3) | Hog futures may continue to correct from an oversold market, which could move futures above the downtrend line that has been prominent since late September. | 3) | Fundamentals in the hog market have yet to provide consistent support. Until that is uncovered, the upside may be limited. |
4) | Pork demand is expected to increase in December and should provide support to cutout prices. | 4) | Hogs continue to increase in weight, leaving more pork tonnage available to the market. |
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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