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DTN Midday Livestock Comments 10/20 11:56


DTN Midday Livestock Comments 10/20 11:56

Hog Futures Continue Lower

Moderate pressure in lean hog trade has eroded last week's gains. This broke
through immediate support levels and is creating additional longer-term concern
for the complex. Cattle prices are mixed with traders trying to establish more
defined market ranges.

By Rick Kment, Contributing Analyst

GENERAL COMMENTS:

Light trade is seen in all livestock futures Wednesday morning. The
development of cash cattle trade in Texas at steady money is creating hopes
that prices may continue to strengthen as the week continues. Cattle futures
are mostly higher, offsetting early week softness, while follow-through
pressure in hog markets has now moved through initial support levels. This
could leave hog markets vulnerable to additional liquidation in the next couple
of days. December corn is up 5 1/4 cents per bushel and December soybean meal
is up $4.50 per ton. The Dow Jones Industrial Average is up 280 points with
Nasdaq up 11 points.

LIVE CATTLE:

Trade is mixed in live cattle futures Wednesday morning. Traders are
focusing on limited market movement at midweek. Nearby contracts are slightly
above last week's lows, which may indicate traders trying to establish a more
stable range. Analyst expectations for Friday's Cattle on Feed report are a
0.7% drop in overall on-feed numbers compared to a year ago. Marketings are
expected to see the most significant drop, with 97.2% of last year's level
reported in September. Traders are starting to adjust positions to these
levels, but these shifts could be seen until closing bell Friday. Cash cattle
interest is developing Wednesday morning. Bids are available in all areas with
packers offering $124 live basis in the South and $125 live basis and $196
dressed basis in Nebraska. Light trade has developed in Texas at $124 per cwt,
but it appears most feeders are holding out for higher money. The $124 per cwt
trade is fully steady with last week's average. If the opportunity to move
prices higher is there, now appears to be the time to make it happen. The Fed
Cattle Exchange Auction on Wednesday listed a total of 2,757 head, of which
none actually sold, 362 were scratched from the auction and 2,395 head were
listed as unsold, as they did not meet the reserve prices, which ranged from
$121 to $126. Opening prices ranged from $120 to $122, high bids ranged from
$123 to $124. The state-by-state breakdown looks like this: Texas 1,137 total
head, all of which went unsold; Kansas 1,299 total head, with none sold, 937
head went unsold and 362 were scratched from the auction; South Dakota 252
total head, all of which went unsold; Nebraska 69 total head, all of which went
unsold. Wednesday morning's boxed beef prices are mixed in moderate trade, with
choice cuts $0.37 lower at $280.51 and selects up $1.47 at $263.00 on a total
count of 77 loads. Dow Jones estimated Wednesday's cattle slaughter at 121,000
-- 1,000 more than a week ago and 2,000 more than year ago levels.

FEEDER CATTLE:

Traders in the feeder cattle complex are trying their best to regain market
composure following early week losses. Most contracts are higher at midday,
with the most active support seen in January and March. The focus on limited
movement in live cattle trade, combined with uncertainty as to how the upcoming
Cattle on Feed report will impact trade has helped draw buyers back into the
market. But it is going to be a difficult task to push prices significantly
higher over the next couple of days with markets likely to wander within a
moderate trading range. Cash feeder cattle auctions continue to see increased
volume, although price levels are unevenly mixed. Last week's national feeder
cattle summary posted prices generally $2 lower to $3 per cwt higher with
overall demand described as moderate to good. Variability of cattle being sold
continues to be the biggest focus on price levels at this point. The CME Feeder
Index was priced at $154.10 for Oct. 18.

LEAN HOGS

Moderate pressure is seen early Wednesday morning. This selling has left
additional softness through the entire complex. Although losses for the day
have been kept in check, the most recent shift lower has moved through support
levels. December contracts have broken below $77 per cwt, while February
contracts are at $80 per cwt. A close at these levels will offset recent market
support and could open the door for additional underlying pressure over the
next two weeks. Although limited stability is starting to emerge in cash and
pork values, the lack of buyer support in the futures market may test further
market lows over the upcoming days. Cutouts are up $1.74 at $101.01 Wednesday
morning on 167.30 loads. Negotiated hog prices are $0.35 lower at $66.21 on
6,159 head on the morning report. Dow Jones estimated Wednesday's hog slaughter
at 478,000 -- 1,000 more than a week ago and 12,000 less than year ago levels.
The CME Lean Hog Index is listed at $85.89 per cwt for Oct. 18.

Rick Kment can be reached kmentrick@gmail.com




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