DTN Early Word Livestock Comments
Can Feeder Cattle Recover?
| Futures | Equiv | |||||
| Cattle: | Steady | Lower | Live | $267.56 | -$0.21 | * |
| Hogs: | Lower | Lower | Lean | $77.41 | +$1.65 | ** |
*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:Last week was a rough week for cattle markets, with live cattle futures down $6.90 while feeder cattle futures were down $15.45. Weaker cash trade was the biggest headline of the week with packers holding all the cards. There currently is a large supply of market-ready cattle in the North and as they gain more pounds, packers appear to be comfortable, and we're hearing that some are buying into the first week of December currently. Carcass weights are a record for this time of year, and the current backlog of slaughter ready cattle are only adding to the bearish tone of the market. For the Commitments of Traders report on Friday, managed money sold 6,882 of their long positions, leaving a net long of 49,691 contracts in live cattle futures. For feeder cattle, managed money sold 597 contracts to be net long 13,597 contracts.
Lean hog futures have been circling the drain as all fundamentals are working against hogs. Weights are heavy, availability of market-ready hogs is abundant and demand is light. On the Commitments of Traders report on Friday, managed money sold another 7,426 contracts to extend the already record net-short position further to a new record at 59,072 contracts.
| BULL SIDE | BEAR SIDE | ||
| 1) | Negotiations regarding Los Angeles and Long Beach ports have been extended now until Nov. 20, pushing back potential strikes at two of the biggest beef handling ports. | 1) | Cash prices fell dramatically last week, and the abundance of market-ready cattle is expected to continue for several weeks before they're cleared. |
| 2) | Feeder cattle filled their gap from Sept. 18 and then rallied back nearly $6 off the lows on Friday. Market will be watching Monday's performance. | 2) | Heavy carcass weights and reduced packer capacity in the East weigh heavily on markets. |
| 3) | Pork cutout values were higher on Friday afternoon. | 3) | CME Lean Hog Index fell again on Friday. |
| 4) | Holidays are around the corner along with holiday pork demand. | 4) | Packer demand is expected to be light this week. |
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.
Sarah Jungman can be reached at sjungman@jpsi.com
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